Leading consumer and commercial information solutions provider Equifax, Inc. (EFX) recently completed the acquisition of Costa Rica-based credit reporting company, Datum. The company did not disclose the financial terms of the deal.
After the news of the acquisition broke, Equifax shares fell 45 cents to close at $30.57.
Equifax already has a customer service and technology service center in Costa Rica that employs more than 500 people. This apart, Equifax also bought DataVision Resources, which provides data and business services to the mortgage, insurance and financial services industries, during the first week of August this year.
Datum is headquartered in San Jose. The company primarily collects, synthesizes and provides consumer credit data to banks, telecommunications companies, retail and insurance businesses across Costa Rica. We believe that Datum is a natural choice for Equifax as it will help the company to expand its geographical footprint, and will enhance its position in the rapidly growing Costa Rican market.
Equifax has used acquisitions and divestitures to expand and further emphasize on the core business. These acquisitions are a part of the company’s expansion strategy in its four targeted geographical regions — India, Russia, China and Latin America.
The company is also expanding its core operations in Russia. This has resulted in a 12.0% growth in the International segment during the second quarter.
We expect these strategic acquisitions to generate growth for the company over the long term. On the other hand, Equifax was recently in the news for selling all the assets of its Direct Marketing Services division to Alliance Data Systems for $117.0 million. The company expects to use the proceeds from the deal to expand its business and meet other general corporate obligations. While Equifax’s core business remains solid, the sale of its direct marketing division will enable the company to better focus on its main business.
Equifax delivered modest second quarter results, matching the Zacks Consensus Estimate on the bottom line. Though the guidance for the third quarter was positive, it was not enough to drive the stock. However, management’s focus on product innovation, broadening data assets through acquisitions and continuous share gains in North America were encouraging. We believe Equifax is well positioned to benefit from its leadership in important markets and strength in international markets.
The recent acquisition is expected to consolidate Equifax’s presence in Costa Rica, augmenting international revenues. However, given its strong correlation to consumer and financial markets, as well as its U.S. exposure, improvement in results is likely to be gradual, on par with the country’s economic recovery. The current weakness in the mortgage sector could also rationalize Equifax’s growth.
The company currently has a Zacks #2 Rank (short-term Buy rating).
