Dun & Bradstreet Corp (DNB) Gets A Poor Rating: Equifax Inc. (EFX), Moody’s Corporation (MCO)

Dun & Bradstreet Corp (NYSE:DNB)tanked earlier this month after posting fourth quarter numbers below Wall Street expectations, which was a result of weakness in its North American business. D&B’s stock fell more than 7%, but I think it’s worth taking a look at the company to see if it could be a buy on the weakness (check out the hedge funds owning Dun & Bradstreet). However, I have my doubts that I can convince investors to buy into the stock.

The earnings numbers. The numbers appear to have missed across the board, on sales, operating income and EPS. Sales came in at $463 million, short of $479 million consensus; operating income was $172 million, below consensus of $176 million; and actual EPS was $2.38, short of the Street estimates of $2.47. D&B’s business has been hit hard due to a contraction in business spending. Other notable headwind for D&B is high debt levels, where total debt is at almost $900 million, versus $860 million in the previous quarter. The company’s debt ratio is over 140% due to its relatively high debt load and negative equity, where its stockholders’ equity is at negative $770 million.

Increasing competition will also pressure D&B profitability and margins going forward. The competition includes major corporate information gathering companies Equifax Inc. (NYSE:EFX), Moody’s Corporation (NYSE:MCO), Fair Issac Corporation (NYSE:FICO) and Axiom . Equifax has a large reliance on the mortgage industry, which has proved troublesome for the company, especially with the decline in home purchases. Equifax’s earnings for last quarter came in at $2.20 per share, up from $1.93 per share for the same quarter last year, but still well below analysts’ estimates of $2.46 (read more about the new-age ratings agencies). Equifax also offers corporate credit rating services, which more directly compete with D&B.

Moody’s stock has fallen more than 10% over the past few days on news that S&P, fellow major rating agency, was being sued by the Department of Justice, claiming that the agency knowing attached faulty ratings to structured finance products. Although the DOJ has made no mention of dragging Moody’s into the suit, the stock remains depressed on concerns that the company could be involved. The business of being a major credit rating agency involves high barriers to entry, which provides some insulation to Moody’s business. Despite the DOJ overhang, the stock trades with a PEG that is only 0.9 (a PEG below 1.0 suggests the stock is a solid growth at a reasonable price opportunity).