Deutsche Bank On Info Services Group: 3 Buys, 2 Holds And A Sell

Deutsche Bank has become selective on information service stocks amid the potential for further rate hikes, which may impact valuations in the sector.

Ratings

The brokerage launched coverage of Corelogic Inc (NYSE: CLGX) with a Sell rating and reinstated coverage of Nielsen N.V. Ordinary Shares (NYSE: NLSN) and Verisk Analytics, Inc. (NASDAQ: VRSK) with Hold ratings. The firm also maintains its Buy ratings on IHS Markit Ltd (NASDAQ: INFO), TransUnion (NYSE: TRU) and Equifax Inc. (NYSE: EFX).

Impacts To Valuation

“While we are impressed with these unique, highly recurring business models, valuation could be impacted by sector rotation coupled with the potential for even higher interest rates,” analyst Kevin McVeigh wrote in a note.

Deutsche Bank’s analysis suggests that multiples for these stocks have historically contracted when yields rise, especially for names with more mortgage exposure such as CoreLogic.

“With 10-yr treasury yields hovering around 2.40 percent and our chief US strategist calling for a range of 2.25–2.75 percent in 2017 and 3.0 percent in 2018 this is something we are monitoring stringently,” McVeigh continued.

Nielsen

For Nielsen, the analyst will become more constructive once it gains more stability in developed markets. McVeigh, who has a price target of $48 on the shares, though likes the company’s expansion into total audience, buys the international margin story and impressive capital returns.

Verisk

Meanwhile, the analyst’s Hold rating on Verisk Analytics is based on the thesis that the Street isn’t adjusting for decelerating growth in its discretionary business due to uneven growth. McVeigh has a price target of $85.

CoreLogic

Further, McVeigh has launched coverage of CoreLogic with a Sell rating and $33 price target.

“CoreLogic is a leader in property intelligence, but its correlation to interest rates [.45] + lower originations could pressure earnings + valuation as rates rise and originations fall,” McVeigh added.

Equifax

The analyst also lowered its price target on Equifax to $130 from $140.

At Last Check

• CoreLogic shares were down 2.56 percent at $36.92.
• Equifax shares were up 2.31 percent at $116.10.
• IHS Markit was up 0.23 percent at $35.20.
• Nielsen was up 2.24 percent at $43.35.
• TransUnion shares were up 1.91 percent at $29.89.
• Verisk was down 0.25 percent at $82.84.