Investing.com - Experian's (LON:EXPN) outlook for margin expansion is "robust" and underpins the potential for sustained organic growth, according to analysts at Morgan Stanley (NYSE:MS).
In a note to clients naming the Ireland-based data analytics group as a "top pick" in the European business services sector, the analysts said they expect "improved" consumer credit conditions, a "more favorable regulatory environment", and "mortgage upside" to drive strong returns this year.
The Morgan Stanley analysts led by Annelies Vermeulen also raised their price target for the stock and backed their "overweight" rating.
Experian aggregates data on millions of US consumers and companies, offers analytics and marketing assistance tools to businesses, and provides products designed to protect consumers from fraud.
In November, Experian predicted that its core profit margin for its 2025 fiscal year would be towards the upper end of its 30-50 basis point guidance.
The company said in a statement at the time that it was reaping the benefits from demand for new products. A series of Federal Reserve interest rate cuts last year is expected to help encourage mortgage lending activity following a period of tepid credit supply -- supporting demand for Experian's fraud and identity offerings.
"Rate cuts should provide positive catalysts in the near term," the Morgan Stanley analysts wrote. "While our economists expect moderate deceleration in US consumer spending in 2025 [...], this is partly due to lower immigration, and as delinquency rates moderate consumer credit conditions should improve, offsetting slower consumer spending."
Despite the upbeat margin projection, the stock fell after the announcement in November, with analysts disappointed by the company's decision to leave its annual organic revenue growth guidance unchanged at 6% to 8% for the year ended on March 31. Even still, shares in Experian have risen by more than 9% over the past one-year period.