Equifax isn't out of the woods just yet

Equifax Inc. (NYSE: EFX) is hoping to show its investors the company has put its massive security breach behind on Tuesday when the company reports its fourth-quarter earnings after the market close. While analysts are expecting some solid numbers from Equifax, fallout from the breach will likely continue to hurt the stock.

Analysts are expecting Equifax to report fourth-quarter earnings per share of $1.35 on revenue of $825.69 million. The consensus revenue number represents 3.1 percent year-over-year growth. Last quarter, Equifax’s profit dropped 27 percent after the company said it endured a $27.3 million pre-tax income hit associated with the breach, which exposed sensitive data of more than 140 million Americans.

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This quarter, shareholders will be looking for those breach-related expenses to decline and will be watching for commentary from management about how the company is moving past its security issues.

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Equifax investors got at least one piece of good news last week when Reuters reported that the Consumer Financial Protection Bureau appears to be backing off of its investigation into Equifax and the security breach. Three sources familiar with the matter have said new CFBP head Mick Mulvaney has not issued subpoenas against Equifax or sought to obtain sworn testimony from company insiders, two early steps of typical investigations.

Mulvaney recently replaced former CFPB head Richard Cordray, who launched the Equifax investigation.

Equifax is also under investigation by the Federal Trade Commission and every state attorney general in the country.

Even without the threat of major action by the CFPB, analysts say Equifax stock is still not a particularly compelling value.

“The impact of the recent data breach will dominate near-term results, but we believe Equifax's entrenched position will allow it to weather the storm,” Morningstar analyst Brett Horn says. “Limited competition in its core credit bureau business allows Equifax to enjoy strong margins, but the maturity of its core business restricts potential growth.”

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CFRA analyst Victor Ahluwalia says the breach will continue to weigh on Equifax’s financial performance in coming quarters.

“We see this breach as a headwind for at least the next 12 months, with costs associated with free credit monitoring services and potentially increased customer churn,” Ahluwalia says.

Morningstar has a “fairly valued” rating and $122 fair value estimate for Equifax. CFRA has a “neutral” rating and $115 price target for EFX stock.

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