TransUnion Earnings: Solid Quarter, Outlook Maintained

TransUnion TRU reported a decent second quarter. Revenue grew 3% on an organic constant currency basis to $968 million, which beat the firm’s outlook of $948 million-$958 million and the FactSet consensus of $958 million. Likewise, adjusted EBITDA of $339 million and adjusted EPS of $0.86 edged out the consensus estimates of $335 million and $0.83, respectively. Despite the strong quarter, TransUnion maintained its 2023 outlook, which we attribute to the uncertain macroeconomic environment, weakening mortgage outlook, and perhaps conservativism as the stock has previously suffered when the firm modestly missed guidance. Overall, we will maintain our fair value estimate of $101 and wide moat rating on TransUnion’s shares.

Diving deeper into the firm’s 3% constant currency revenue growth, U.S. markets grew 1% as the firm’s card and consumer lending business faced difficult comparisons and as issuers became more selective on originations. Mortgage revenue grew 16% as pricing increases led by Fair Isaac were more than able to offset a 29% decline in volumes. The emerging verticals business was up 3% for the quarter and 2% year to date. As the firm’s challenges in insurance and tenant screening moderate, TransUnion expects emerging verticals to grow by a mid-single-digit percentage for the full year, a reasonable result in our view. International continues to grow double-digits on a constant currency basis, with India and Asia-Pacific the fastest growers. While only about 5% of the firm’s revenue, India grew 35% and has a large runway for growth—TransUnion is the leader in that market. Consumer interactive declined 2% but is improving.