RBC downgrades Equifax stock rating on mortgage weakness concerns

RBC Capital has lowered its rating on Equifax Inc. stock from "Outperform" to "Sector Perform" amid concerns over mortgage weakness. The firm raised its price target for the stock to $189 from $177, as Equifax's current share price is $182.36. RBC's decision to downgrade the stock is based on three key headwinds: persistent mortgage market challenges exacerbated by higher interest rates, potential cooling in consumer lending, and possible regulatory concerns related to a tri-merge to bi-merge transition.

The firm's fiscal 2027 earnings per share estimate for Equifax stands at $9.00, which is lower than the consensus estimate of about $9.66. In terms of valuation, RBC places the stock at 21 times fiscal 2027 price-to-earnings ratio, while the current P/E ratio is 29.5. Notably, 19 analysts have revised their earnings estimates downwards for the upcoming period, according to InvestingPro Tips.

Equifax's recent third-quarter earnings exceeded expectations, with earnings per share surpassing analyst estimates. However, the company anticipates a decline in USIS mortgage credit inquiries of over 20% in the fourth quarter of 2026, with a projected decline in the high-single digits for fiscal 2027, primarily concentrated in the first eight months of the year. RBC models a mid-teens decline in mortgage inquiries for the first half of 2027.

Despite these concerns, Equifax's guidance is valued at 21 times fiscal 2027 price-to-earnings ratio, which is lower than its current P/E ratio of 29.5. The firm believes that the company remains undervalued at its current levels, positioning it among stocks on the Most Undervalued list.