Key Takeaways
Fair Isaac Corp. (NYSE: FICO) shares rose 3.3% after the company slashed the price of its FICO Score 10T by 80% to compete with rival VantageScore in the mortgage lending market, a move announced alongside a fiscal second-quarter earnings beat.
"We anticipate no loss of volume to Vantage in this fiscal year,” CEO William Lansing said on the company’s earnings call, expressing confidence in the competitiveness of its newer scoring model.
The credit scoring giant reported fiscal second-quarter revenue grew 39% year-over-year to $691.7 million, surpassing the consensus estimate of $630.2 million. Earnings per share came in at $11.14, well ahead of the $9.26 expected by analysts, according to FactSet.
The aggressive price cut on its Score 10T model, from $4.95 to 99 cents, directly targets VantageScore's pricing and follows a federal decision to allow alternative credit scores for mortgage applications. While the move aims to protect its market share, FICO's stock remains down 38% year-to-date, reflecting investor uncertainty.
For the full fiscal year, FICO guided for revenue of $2.45 billion and adjusted earnings of $40.45 per share. Both figures were slightly below the analyst consensus of $2.48 billion and $41.34, respectively.
The competitive pressure comes from VantageScore, a joint venture of the three major credit bureaus: Equifax (NYSE: EFX), TransUnion (NYSE: TRU), and Experian (LON: EXPN). The decision by the Federal Housing Finance Agency in April to approve VantageScore 4.0 for use by mortgage lenders Fannie Mae and Freddie Mac ended FICO's long-standing dominance in the government-sponsored enterprise market.
The price reduction signals FICO's intent to aggressively defend its incumbency against new competition. Investors will be closely watching mortgage score volumes in the coming quarters to see if the pricing parity is enough to prevent lenders from adopting VantageScore.
This article is for informational purposes only and does not constitute investment advice.
