Will Higher Revenues Aid TransUnion's (TRU) Q4 Earnings?

TransUnion (NYSE:TRU) is slated to report fourth-quarter 2017 results before the opening bell on Feb 13.

Last quarter, the company reported revenues of $498 million, comfortably beating the Zacks Consensus Estimate of $474 million. TransUnion delivered an impressive average positive surprise of 10.3% in the trailing four quarters, beating estimates in each.

Let’s see how things are shaping up for this announcement.

Factors at Play

TransUnion’s attractive business model with diversified revenue streams, significant operating leverage, low-capital requirements, and strong and stable cash flow have produced consistent operating results in the recent times.

During the quarter, the acquisition of Factor Trust — one of the fastest growing companies specializing in the field of alternative credit data, analytics and risk scoring information — was a strategic move by TransUnion. We anticipate the buyout to have a favorable impact on the company’s results.

Top-Line Expansion

The Zacks Consensus Estimate for TransUnion’s fourth-quarter revenues is $488 million, higher than reported revenues of $436 million in the prior-year quarter. Higher revenues are expected across all the segments of the company.

The U.S. Information Services segment — the largest revenue-generating segment of the company — is expected to generate $297 million, higher than the reported figure of $268 million in the prior-year quarter.

Also, the International and Consumer Interactive segments are expected to generate revenues of $97 million and $105 million, respectively, up from $86 million and $97 million reported in the prior-year quarter.

Higher consumer awareness of the risks of identity theft propelled by a greater frequency of cyber-attacks are driving demand in TransUnion’s Consumer Interactive segment.

Earnings Whispers

Our proven model does not conclusively show that TransUnion is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -0.12%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

TransUnion Price and EPS Surprise

TransUnion Price and EPS Surprise | TransUnion Quote

Zacks Rank: TransUnion has a Zacks Rank #3. While this increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Zendesk, Inc. (NYSE:ZEN) has an Earnings ESP of +14.04% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

AmerisourceBergen Corporation (NYSE:ABC) has an Earnings ESP of +0.73% and a Zacks Rank #2.

The Home Depot, Inc. (NYSE:HD) has an Earnings ESP of +0.27% and a Zacks Rank #2.

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