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Equifax Inc. (EFX) stock surged Tuesday after the credit reporting company reported better-than-expected third-quarter earnings, even as weakness in the U.S. mortgage market continues to weigh on its business.
But here is the twist: the company also lowered its full-year revenue outlook and issued fourth-quarter guidance below Wall Street estimates. Investors, apparently, decided to focus on the beat.
Equifax reported third-quarter adjusted earnings of $2.26 per share, up 11% year over year and above the $2.20 analyst estimate.
Revenue increased 10% to $1.693 billion, narrowly beating the $1.691 billion consensus estimate.
Weaker U.S. mortgage conditions reduced quarterly revenue by approximately $20 million.
Adjusted EBITDA margins, excluding FICO mortgage royalty pass-through revenue, expanded 130 basis points. Cost reductions and productivity improvements supported profitability.
Equifax returned $158 million to shareholders during the quarter, bringing total shareholder returns to approximately $850 million for the first nine months.
Workforce Solutions reported 9% revenue growth in diversified markets and 13% growth in Verified. Talent Solutions revenue climbed more than 20%.
Employer Services revenue fell 5% following the suspension of the Work Opportunity Tax Credit.
U.S. Information Solutions reported 6% diversified-market revenue growth, while mortgage revenue increased 28%.
Its adjusted EBITDA margin, excluding FICO royalties, reached 42.4%, expanding more than 320 basis points.
Meanwhile, about 2,000 mortgage lenders were using VantageScore in their underwriting processes, up sevenfold since April. Equifax estimates broader adoption could save the mortgage industry $1 billion annually.
International revenue grew 7% in constant currency, supported by Asia-Pacific and Latin America.
The company expects to complete its $750 million acquisition of Círculo de Crédito in the fourth quarter. It anticipates the deal will boost adjusted earnings in its first full year.
For the fourth quarter, Equifax expects adjusted earnings of $2.07 to $2.17 per share, below the $2.20 analyst estimate.
Revenue is projected at $1.605 billion to $1.635 billion, also below the $1.692 billion consensus.
The company narrowed its 2026 adjusted earnings outlook to $8.45 to $8.55 per share, compared with its previous forecast of $8.39 to $8.69. Analysts expect $8.50 per share.
However, Equifax lowered its full-year revenue forecast to $6.646 billion to $6.676 billion from $6.710 billion to $6.780 billion. Analysts expect $6.736 billion.
Despite the weaker outlook, Equifax expects more than $1 billion in free cash flow and $1.5 billion available for acquisitions and shareholder returns.
The company also raised its 2026 adjusted EBITDA margin expansion target to 100 basis points from 75 basis points, excluding FICO royalty pass-through revenue.
It continues to target $150 million in multiyear savings from artificial intelligence initiatives.
Equifax said mortgage rates climbed to approximately 7.5% in September from 6.6% when it issued guidance in July.
As a result, the company expects mortgage-related revenue to fall $60 million below its previous fourth-quarter forecast and approximately $80 million below its earlier full-year projection.
Equifax expects U.S. mortgage originations to decline 6.5% to 7.5% in 2026.
Assuming current mortgage activity levels persist, Equifax expects U.S. mortgage transactions to fall by a high-single-digit percentage in 2027.
Management, however, sees substantial upside from a housing market recovery.
Equifax estimates that a full mortgage-market recovery could generate about $1 billion in additional revenue and $700 million in incremental margin dollars.
More than 17 million mortgages carry interest rates above 6%, potentially creating refinancing opportunities if borrowing costs decline.
During the earnings call, Equifax Chief Financial Officer John Gamble warned that persistent inflation continues to disproportionately strain lower-income and subprime consumers.
He said most Americans remain financially resilient, supported by low unemployment.
Equifax also noted that financial institutions have not significantly tightened credit lines or increased portfolio reviews, suggesting lenders are not yet preparing for a broader economic downturn.
Equifax reaffirmed its long-term targets of 7% to 10% organic revenue growth and at least 50 basis points of annual adjusted EBITDA margin expansion.
The company expects AI, cloud technology, proprietary data and productivity improvements to support growth.
Meanwhile, a potential mortgage-market recovery could provide another revenue boost.
EFX Price Action: Equifax shares were up 10.46% at $167.50 at the time of publication on Tuesday, according to market data.
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