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Experian slumps after Jefferies downgrades on Trump uncertainty and Brazil financial scandal

Jefferies expects Experian to spend US$500mln on acquisitions after carrying out a share buyback
Donald Trump
US President Donald Trump has created uncertainty over his fiscal policy

Experian plc (LON:EXPN) shares dove after Jefferies cut its rating on the credit checking agency, lowered its target price and slashed its earnings forecast, citing a slowdown in US credit and uncertainty in Brazil.

Shares fell 2.29% to 1,622.0p in morning trading. 

The company yesterday reported a pre-tax profit of US$1.07bn for the year to 31 March, compared to US$966mln the previous year, with revenue rising to US$4.34bn from US$4.24bn.

However, Jefferies joined analysts in voicing concerns over political uncertainty over US President Donald Trump's policies and a financial scandal in Brazil where President Michel Temer is embroiled in bribery allegations. 

The bank reduced its rating to ‘hold’ from ‘buy’ and bumped down its target price to 1,550p from 1,670p. It also cut is earnings per share estimate for 2018 by 3%.

“Although we anticipated an eventual slowdown in North American credit growth the moderation occurred sooner than expected,” Jefferies warned. 

On Brazil, Jefferies said while it has seen improvement in the full year the outlook remains uncertain.

At the company’s full year results, Experian also announced a US$600mln share buyback to reduce capital and allow it to allocate more cash over the next 12 months.  Jefferies thinks a large chunk of this will be spent on acquisitions.

“In our view, Experian has US$1.1bn surplus capital to deploy in fiscal year 2018 but could stretch to US$1.8bn if management push leverage to the top of their 2.0-2.5x target range,” Jefferies said.

“Although a US$600m buyback will be executed this year and we believe US$500m will be spent on acquisitions, for modelling purposes we assume the buyback consumes the entire US$1.1bn.”

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Experian Group Timeline

December 04 2009

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