What Happened?
Shares of credit reporting company TransUnion (NYSE:TRU) fell 11.2% in the afternoon session after Fair Isaac (FICO), the company behind the widely used credit score, announced a new program to license its mortgage scores directly to lenders.
This move effectively bypassed the traditional role of the three major credit bureaus, including TransUnion. The new "FICO Mortgage Direct License Program" allowed mortgage lenders to get credit scores straight from FICO, potentially pressuring the earnings and margins of companies like TransUnion, which acted as intermediaries. FICO also announced it would offer the scores at a 50% discount compared to the industry average, a change expected to provide immediate cost savings to mortgage lenders. The news sent shockwaves through the industry, as shares of fellow credit bureaus Equifax and Experian also tumbled, while FICO's stock soared.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy TransUnion? Access our full analysis report here, it’s free.
What Is The Market Telling Us
TransUnion’s shares are somewhat volatile and have had 14 moves greater than 5% over the last year. But moves this big are rare even for TransUnion and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 21 days ago when the stock gained 3.7% on the news that the Consumer Price Index (CPI) report bolstered expectations for a Federal Reserve interest rate cut despite showing persistent inflation.
The August CPI data, a key measure of inflation, showed prices rose 2.9% annually, slightly more than economists expected. While inflation remains above the Federal Reserve's 2% target, investors were focusing on other signs of a cooling economy, particularly a weakening labor market. As a result, the market widely anticipated that the Fed would cut interest rates at its September meeting to support the economy. Investors priced in multiple rate cuts by year-end, which boosted market sentiment and sent Treasury yields lower.
TransUnion is down 19.3% since the beginning of the year, and at $74.15 per share, it is trading 31.8% below its 52-week high of $108.67 from October 2024. Investors who bought $1,000 worth of TransUnion’s shares 5 years ago would now be looking at an investment worth $864.22.
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