Experian delivered revenue growth of 8% over the third quarter, with underlying growth of 6% (both ignoring currency moves). Growth was broad based across geographies and business divisions, but came in slightly below expectations.
Trends in the largest North American region are improving, while growth areas like Brazil continue to see strong consumer demand.
Full-year guidance is unchanged, looking for underlying revenue growth of 6-8% and operating margin expansion at the upper end of a 0.3-0.5% range.
The shares were broadly flat in early trading.
Our view
Experian is a global information services company specialising in data analytics, credit reporting, and identity verification.
The higher rate environment means lending conditions are a little weak, but Experian's broad range of products and services position it well across various market conditions. The proof’s in the pudding, and strong, dependable, top line growth and margin expansion despite softer conditions is impressive.
The US credit bureau market, dominated by Experian, Equifax, and TransUnion, forms the core of Experian's operations, where it connects borrowers with lenders. This market concentration provides pricing power, allowing cash from core operations to fuel growth in new areas. While rising bond yields and higher borrowing costs pose challenges, encouraging third-quarter commentary highlighted improving trends.
The Consumer Services division differentiates Experian from peers and has shown impressive growth, driven by recent investments and strategic initiatives. It’s further bolstered by a significant rise in free members, now totalling over 190mn. With financial literacy becoming more widespread, Experian is well-positioned to capitalise on this trend, offering tools that empower consumers to manage their credit and financial health more effectively.
As the world continues to digitise, we think Experian's data-led solutions for businesses and consumers are likely to see increasing demand. Identity verification, credit assessments, and fraud prevention are critical services that businesses cannot easily forego, adding a layer of resilience to revenue streams.
In Latin America, Experian is experiencing significant growth, particularly in Brazil, where the company dominates the market. The region's financial services sector is undergoing substantial upgrades, presenting opportunities to expand the consumer base and service offerings.
Artificial Intelligence (AI) remains a focal point for innovation. Experian's vast and unique data sets provide a robust foundation for AI applications, enhancing product offerings and creating new opportunities to add value. AI integration is already underway, and we see substantial potential for future advancements in this area.
Strong cash generation and a healthy balance sheet are attractive qualities. Net debt relative to underlying cash profit is below the target range, this provides stability and helps support the ongoing dividend payments and share buybacks. Though there are no guarantees.
The valuation has come under pressure in recent months, and we think that presents an opportunity to gain exposure to Experian's robust market position, strategic investments in technology, and diversified growth opportunities. But stubborn borrowing costs, and question marks around demand for lending, are very real near-term risks.
Environmental, Social and governance (ESG) risk
The commercial services industry is low/medium risk in terms of ESG. Social and governance risks are the most acute - like product governance, data privacy & security, and labour relations - as exposure to environmental risks is minimal. Companies operating within facilities maintenance are also exposed to community relations and emissions risks.
Experian’s overall management of material ESG issues is strong.
Responsibility to oversee ESG issues is assigned to a management committee, and ESG reporting now follows all leading reporting standards. Experian has a very strong environmental policy and a strong whistleblower programme. ESG targets are linked to executive performance but aren’t specifically linked to pay. There is a strong data privacy and security policy in place, alongside a very strong cybersecurity programme.
Experian key facts
All ratios are sourced from Refinitiv, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
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