Morningstar | TransUnion Delivers Strong Fourth Quarter, but 2019 Guidance Weak
TransUnion’s fourth-quarter results were fairly impressive, with the company continuing to deliver strong growth and margin improvement. However, management’s guidance for 2019 is below our expectations. This appears to be largely due to temporary factors, though, and we will maintain our $68 fair value estimate and wide moat rating.Year-over-year revenue grew 22%, or 11% excluding currency impacts and acquisitions. The domestic business saw a strong 12% increase on an organic basis, but was outpaced by organic growth in the international business, which came in at 17%. India remains the star within TransUnion’s international portfolio, with 37% growth excluding currency impacts. We continue to believe the most value-creative long-term expansion opportunity for TransUnion and its peers lies in emerging markets, where growing middle-class populations should allow the companies to export their business model. The consumer business was the laggard, with only 6% year-over-year growth, but this level is not out of line with our long-term expectations for this segment.
Adjusted EBITDA margins improved to 39.9% in the quarter, compared with 38.8% last year. We think the company’s solid growth and the scalable nature of the business will allow for ongoing margin improvement long term, but we don’t expect the company to maintain this pace. Our long-term assumptions are more in line with the 40-basis-point improvement TransUnion saw over the full year.
During the call, management discussed progress at the recently acquired U.K. company, CallCredit. This unit generated only 3% constant currency growth. However, management pointed out that the transition to TransUnion's processes is somewhat disruptive, and it expects growth to accelerate in 2019. We accept this explanation, and we still like the strategic thrust of the deal, as TransUnion expanded the part of the business that we believe has the widest moat and expanded its international footprint.
TransUnion is an information and insights company. The company provides consumer reports, actionable insights and analytics such as credit and other scores, and decisioning capabilities to businesses. The company has the following reportable segments: United States Markets, which provides consumer reports, actionable insights and analytics such as credit and other scores, and decisioning capabilities to businesses; International, which provides services similar to its United States Markets segment to businesses in select regions outside the United States; and Consumer Interactive, which provides solutions that help consumers manage their personal finances and take precautions against identity theft.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
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