Equifax cuts sales outlook on mortgage slump; profit goal barely moves

Equifax calls itself a global data, analytics and technology company. It is one of the three major consumer credit bureaus, with Experian and TransUnion, and American mortgage lenders buy a combined report drawing on all three.¹ Its biggest unit, Workforce Solutions, sells employment and income checks built on payroll data from more than 4 million organizations, and it was 43% of 2025 revenue.² The second unit, U.S. Information Solutions, sells credit files and scores, and the third is International. The United States was 77% of 2025 revenue, and mortgage lending was the largest customer group at 21%.³

Before this release Equifax had 117.1 million shares, worth about $18.56 billion at the $158.52 close on October 19, 2026.¹ In February it guided 2026 revenue to $6.72 billion at the midpoint and adjusted earnings to $8.50 a share. In July it set the revenue range at $6.71 billion to $6.78 billion and the adjusted earnings range at $8.39 to $8.69.² Its quarterly report in July still expected 2026 mortgage originations to be only slightly below 2025.³

The shares fell hard before this release. In early September the director of the Federal Housing Finance Agency, which oversees the government-backed mortgage giants, posted that Equifax, Experian and TransUnion have been overcharging Americans, and the bureaus' shares tumbled.¹ Around then the chief financial officer sold 4,500 shares at $187.96 under a trading plan adopted in May. By September 30 the stock had closed at $137.235, near the bottom of its 52-week range of $137.01 to $238.94.² It had climbed back to $158.52 before the results. On the results day, the Associated Press credited strong profit reports from Equifax and others for lifting the market.³

Equifax also carries legal costs. In the second quarter it accrued $100.0 million to settle a class action over miscalculated credit scores, a $40.0 million charge after expected insurance.¹ A judge has given the settlement preliminary approval, and a final fairness hearing is set for January 22, 2027.² An antitrust suit over Workforce Solutions has been pending since May 28, 2024, and the Consumer Financial Protection Bureau is investigating that unit; Equifax says it cannot predict the outcome.³

Mortgage scoring is also changing. Equifax says it will keep a $1 price for VantageScore 4.0 mortgage credit scores, a rival to the classic FICO score, through the end of 2028, and the Federal Housing Administration will accept that score from January 1, 2027.¹ In that October release, management called this the most difficult mortgage market in decades.²

Third-quarter revenue was $1,692.5 million, up 10% from $1,544.9 million, and inside July's forecast range of $1.680 billion to $1.710 billion.¹ Sales outside mortgage, which Equifax calls Diversified Markets, grew 8%. U.S. mortgage revenue still rose 15%, and mortgage revenue at the credit-bureau unit rose 28%, but Workforce Solutions' mortgage revenue was flat.² The release says mortgage interest rates increased substantially late in the quarter.³

The company now expects full-year revenue of $6.646 billion to $6.676 billion, growth of 9.4% to 9.9%.¹ The new midpoint of $6.661 billion is about $84 million, or about 1.2%, below July's midpoint of $6.745 billion, and below February's $6.72 billion.² For the fourth quarter alone, the new revenue midpoint of $1.620 billion sits about $81.5 million, or about 4.8%, below the roughly $1.70 billion that July's ranges implied once third-quarter sales are taken out.³ Equifax kept its goal of high single-digit growth for Diversified Markets, so the cut rests on the mortgage forecast.⁴

Reported profit grew faster than sales. Net income attributable to Equifax was $211.7 million, up 32%, and operating income rose to $355.3 million from $264.3 million.¹ Part of that jump is last year's weak base: the third quarter of 2025 carried a $43.9 million charge for job cuts and other realignment costs, and this quarter had none.² On the company's adjusted basis, which adds back $59.9 million of amortization from past acquisitions ($48.0 million after tax) among other items, net income rose 6% to $267.4 million. That is $55.7 million more than reported net income.³

Adjusted earnings per share rose 11% to $2.26. Per-share growth beat profit growth because buybacks cut the diluted share count to 118.1 million from 124.1 million.¹ Adjusted EBITDA, which the company defines as net income plus net interest, taxes, depreciation and amortization, with certain one-time costs added back, rose 11% to $560.2 million. Its margin was 33.1% of revenue.²

Management says cost actions should principally recover the profit lost on lower mortgage revenue. It is working toward a $150 million AI productivity goal, doubled in July for 2026 to 2028.¹ Management credits those actions for the full-year adjusted goal of $8.45 to $8.55 a share falling only $0.04 at the midpoint, from $8.54, though the third quarter's $2.26 beat July's $2.20 midpoint by $0.06, so the implied fourth-quarter figure fell about $0.10, to a $2.12 midpoint from about $2.22.²

Cash flow pays for the business but not for all of the payouts. Free cash flow is operating cash flow minus capital spending, by the company's own definition.¹ So far this year, through September 30, operating cash flow was $1,142.1 million, flat with a year earlier, and capital spending was $378.9 million, leaving free cash flow of about $763 million.² Over the same stretch Equifax spent $652.0 million on buybacks and $199.4 million on dividends, $851 million in all, more than its free cash flow.³

The dividend alone is well covered: 2025 free cash flow was about $1.13 billion against $232.8 million of dividends, about 4.9 times.¹ Third-quarter payouts slowed to $158 million, including 0.5 million shares bought back for $92 million. About $1.5 billion of buyback authority remained at June 30.²

Debt is higher than at the start of the year. At September 30 Equifax had $157.7 million of short-term debt and current maturities and $5,049.0 million of long-term debt, about $5.21 billion in all, against $192.9 million of cash, for net debt of about $5.01 billion.¹ In July it sold $1.0 billion of notes, $500 million at 5.000% due 2029 and $500 million at 5.650% due 2033, and used about $990.5 million of net proceeds to repay commercial paper, its short-term borrowing.² The prospectus showed total debt of $5,467.1 million both before and after the sale, so it swapped short debt for longer debt rather than adding to it. The quarterly report also lists $750 million of 5.10% notes due December 2027.³

Borrowing costs more now. Third-quarter interest expense rose about 19% to $62.3 million from $52.2 million, though operating income still covered it about 5.7 times.¹ The bank credit line caps leverage, debt divided by EBITDA as the agreement defines it, at 3.75 times, and lets cash above $175 million be netted against debt. Equifax was in compliance with all its debt covenants at June 30.²

Our own rough check, not the covenant's math: net debt is about 2.2 times third-quarter adjusted EBITDA annualized, or $2.24 billion, and about 2.3 times on reported operating income plus depreciation and amortization.¹ Adding the Círculo de Crédito enterprise value of $750 million, with none of its earnings counted, lifts the adjusted figure to about 2.6 times, still under the 3.75 cap.²

Shares outstanding fell to 117.1 million at September 30 from 120.4 million at the end of 2025.¹ Employee awards add little dilution: about 1.4 million options were outstanding at the end of 2025 at an average exercise price of $207.53, above today's price, plus 871,000 unvested stock awards.² The notes are unsecured and not guaranteed by subsidiaries, so creditors of the subsidiaries are paid first from subsidiary assets. The note terms do not limit more debt or preferred stock.³

The pending deal has two sides. Equifax agreed to buy Círculo de Crédito, which the July release called the fastest growing credit bureau in Mexico, for an enterprise value of $750 million.¹ That is a purchase price of $825 million, less about $75 million of cash Equifax expects to take over at closing. The deal still needs regulatory approval and is expected to close in the fourth quarter.²

Rival TransUnion also rose about 6.2%, from $73.09 to $77.63 by 1:55 that afternoon, so part of the move was shared across the industry.¹ At $175.44 the stock trades at about 21 times the $8.50 adjusted earnings goal. It sits above June's average buyback price of $162.84 but below April's $182.01.²

The strongest bull case: the non-mortgage business grew 8%, the company-wide adjusted margin was 33.1%, adjusted earnings of $2.26 a share beat the top of July's $2.15 to $2.25 range, and the full-year goal sits at $8.50, the same midpoint as in February.¹ Cost cuts have room to run toward the $150 million goal. About $300 million of yearly government contract value signed in the first half will mainly benefit 2027 and later.² A new-product measure the company calls its Vitality Index hit a record of over 17%, against a 10% long-term goal.³

The strongest bear case, most serious first. Growth is slowing hard: the fourth-quarter range implies 3.5% to 5.4% growth, and management expects the weak mortgage market to last through the rest of 2026.¹ The fourth-quarter adjusted range is $2.07 to $2.17 a share; because the third quarter beat July's $2.20 midpoint by $0.06, the $0.04 full-year trim means the fourth-quarter outlook fell about $0.10 a share, roughly 4.5%, from what July's ranges implied.² Mortgage pricing is under pressure, with Equifax itself holding a $1 score price through 2028, though in February management said the switch to lower-priced Vantage scores should bring significant margin expansion. Payouts ran ahead of free cash flow this year, interest costs are rising, and the $825 million Círculo de Crédito price still has to be paid.³ Legal exposure remains, from the settlement, the antitrust suit and the federal investigation. Equifax lists a credit-rating downgrade, which would raise borrowing costs, among its risks.⁴

Because sales outside mortgage grew 8% and that guidance held, our reading is that this is a mortgage problem, not a broken business, and that the share price can hold above its pre-release close of $158.52 through year-end.¹ That view is wrong if Diversified Markets growth falls below the high single digits the company still promises, or if fourth-quarter adjusted earnings land below $2.07 a share, the bottom of the new range.² Fourth-quarter results will likely come after our call is settled on December 31 (last year's came on February 4, 2026), so before then we will watch for any FHFA move on credit-report pricing after its director said the bureaus have been overcharging Americans, and for the Círculo de Crédito closing; a close back below $158.52 before either would tell us we are wrong.³

Other dates to watch: the Círculo de Crédito closing in the fourth quarter, and the Federal Housing Administration's acceptance of VantageScore 4.0 from January 1, 2027.

The quarterly report gives the $825 million purchase price but does not say whether Equifax will pay from cash, the credit line, commercial paper or new bonds.

The filings give the $750 million enterprise value but not the target's sales or profit, so the price multiple and the effect on 2027 earnings cannot be judged.

The release gives mortgage growth rates, such as 15% for U.S. mortgage revenue, but not mortgage revenue in dollars or how much of the lower outlook comes from it.

The last stated figure is $0.6 billion available on the credit line at June 30; the third-quarter release gives no credit line or commercial paper balance for September 30.

The regulator's criticism came with no stated rule or price limit, and none of the filings or releases describes one.

Equifax has not announced the date; last year's fourth-quarter release came on February 4, 2026.