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The analyst told investors in a note that a recession is priced in, and TRU’s margins are a positive catalyst for the stock. “TRU’s 2023 EBITDA margin expansion potential from M&A is underappreciated,” Balsky said.
“We are moving our 2023/24E EPS to $3.82/4.55 from $3.75/4.38 on a higher margin outlook as we refine our projections for TRU’s recent M&A (Neustar, Sontiq, Argus). By contrast, the Street is at $3.66/4.29,” the analyst stated.
The analyst acknowledged that TRU’s operations will face pressure in a likely 2023 recession, but in BofA’s view, investor estimates and valuation already factor in much of the potential downside.
“Meanwhile, we think several positive 2023E catalysts can support continued multiple expansion, including management increasing its Neustar synergy target, the sales benefit of FICO price increases, waning mortgage pressure (we assume 1Q23 is the bottom for issuance volumes and mortgages are only ~7% of TRU’s sales exiting 4Q22), and improving insurance revenues as rate increases are approved (~6%E of TRU’s revenues),” Balsky continued.
By Sam Boughedda
