Equifax cuts revenue outlook as inflation squeezes lower-income households

What did Equifax report?

Equifax (NYSE: EFX), the credit reporting company, posted third-quarter adjusted earnings and revenue above the analyst consensus on Tuesday. The consensus is the average analyst forecast, the bar a company aims to clear. The revenue beat was narrow.

Why it matters: Profit margins widened as the company cut costs and worked more efficiently. Mortgage revenue in its U.S. Information Solutions unit grew. Still, a weak mortgage market cut total revenue for the quarter, the company said.

Its Workforce Solutions unit also grew. Revenue from employer services fell after the Work Opportunity Tax Credit was suspended. Reports said the shares rose on Tuesday after the results.

Why did Equifax lower its outlook?

The company lowered its full-year revenue outlook. Its fourth-quarter guidance, or its own forecast, came in below Wall Street estimates for earnings and for revenue.

Equifax warned that inflation is squeezing lower-income Americans. It also pointed to continued weakness in the U.S. mortgage market. The company earns fees when lenders pull credit files. Tighter household budgets could mean fewer credit checks.

Equifax also narrowed its full-year adjusted earnings forecast to a tighter range rather than cutting it.

What could come next?

What’s next: Equifax expects to complete its acquisition of Círculo de Crédito in the fourth quarter. The company said it expects the deal to lift adjusted earnings.

More mortgage lenders now use VantageScore, an alternative credit score, in their loan decisions, according to the company. Equifax estimates wider use could save the mortgage industry money each year.

Fresh readings on household finances arrive soon. The University of Michigan's final October consumer survey is due on Oct. 23. It tracks what people expect prices to do. The Conference Board's consumer confidence index follows on Oct. 27. The Fed announces its rate decision on Oct. 28 at 2 p.m. ET.