Goldman Sachs and BofA wax optimistic on Experian

The 5% decline in the rate of growth of sales at Experian’s US consumer unit was better than Bank of America-Merrill Lynch had expected, the broker said in a research report sent to clients.

Organic growth in LatAm was “robust”, analysts Joel Spungin, Nicholas de la Grense, Helena Miles and Judy Shaw said, thanks to “good demand” for products that help clients manage credit risk and growth in the SME and consumer segments, in which it has more pricing power.

On the negative side of the ledger, at current levels exchange rate movements lopped off 60 basis points from the firm’s margins, despite being stable on an underlying basis.

That pressure was likely to flow through to fiscal year 2017 too, the broker said.

Nonetheless, it would be offset by lower interest charges and the extended buyback.

BofA-Merrill reiterated its buy recommendation on the stock and 1,200p target price, adding that cash flow was “strong”.

The company’s results and guidance reflected its resilience in the face of macroeconomic weakness in some regions, such as LatAm, and FX headwinds, Goldman Sachs said.

Analysts Matija Gergolet, Suhasini Varanasi, Hilary Burke and Philip Richards highlighted the organic growth of 6% seen in LatAm, alongside a solid expansion in US credit services and a slower rate of decline in US consumer services.

So, given the share buy-back announcement – which will be incrementally accretive despite its relatively small size – and the slight increase in guidance, they expected markets to react positively to the figures.

Goldman stayed ‘neutral’ on the stock.