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William Blair initiates on Equifax, TransUnion on attractive view of credit data, analytics firms

William Blair analyst Timothy McHugh in an April 8 note initiatedcoverage of Equifax Inc.and TransUnion, both withan "outperform" rating, citing the strong competitive positions and attractivebusiness models of credit data and analytics firms.

McHugh expects such firms to continue to see high capital returnsas well as strong profit margins and cash flow due to the unlikelihood that theindustry's oligopoly structure with high barriers to entry will be disrupted. Theanalyst also said that the industry continues to see improvements in the sophisticationof credit data and analytics, which he says expands their scope of services anddrives innovation in global credit markets.

In initiating on Equifax, McHugh said he believes the companyhas a solid growth story, citing its mix of strong competitive positioning, uniquedata assets and experienced management team, among other factors. Additionally,the analyst said the company benefits from the differentiation due to, and may seegrowth opportunities from, the synergies between its credit bureau business andworkforce solutions business. McHugh set his adjusted EPS estimates for Equifaxat $5.04 for 2016 and $5.51 for 2017.

For TransUnion, the analyst expects double-digit earnings growth,adding that there are still opportunities for the company to go beyond expectations.Additionally, he believes that TransUnion should see benefits in the next few yearsfrom trends such as the maturation of credit bureaus internationally and the solidconsumer credit environment in the U.S. McHugh expects further earnings growth dueto gradual margin improvement and capital deployments into debt reduction and acquisitions.His adjusted EPS estimates are $1.25 for 2016 and $1.38 for 2017.