(Alliance News) - Despite a more than 20% rise in past year, the share price of Experian PLC still does not fully reflect the improved profit margin flowing from cost cuts on the UK and Ireland and from exploiting new business areas in Europe and Asia, Shore Capital said on Friday.
The FTSE 100-listed credit checking firm provides a third-quarter trading update on Friday next week, and analysts at Shore expect to see strong performances across operations and regions.
Back in November, Dublin-based Experian said revenue in the six months that ended September 30 rose 23% year-on-year to USD3.06 billion from USD2.49 billion. Pretax profit increased 43% annually to USD654 million from USD458 million. At constant currency, revenue grew 21%, while pretax profit was up 32%.
For the full-year, Experian said at the time it expected an organic revenue climb of between 11% and 13%. The forecast range was markedly above the 6% constant currency growth seen during the previous financial year. Revenue in financial 2021 amounted to USD5.37 billion.
Shore said it expects Experian to report underlying revenue growth in the third quarter of about 9%. Core North America operations should show 8% growth, supported by low-teen percentage growth in South America and a return to double-digit growth in the Europe Middle East Africa and Asia Pacific regions. Experian's Consumer business will continue to be a standout performer, the broker expects.
"We also look for comments around cash generation and capital efficiency strategy as debt levels appear on a downward track," Shore said.
"We believe that the market is yet to fully take on board strengthening margin trends reflecting cost restructuring in the UK & Ireland and as a period of past accelerated investment in the product set normalises. Emerging territories/businesses in Europe and Asia are also beginning to emerge, in our view, offering potential margin leverage as these begin to turn positive."
Experian shares were down 0.1% at 3,408.00 pence on Friday afternoon. The stock is up 21% over the past 12 months. Shore has a Buy recommendation.
By Tom Waite; thomaslwaite@alliancenews.com
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