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Fidelity National (FIS) Poised for Growth, Cost Woes Prevail

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On Aug 18, we issued an updated report on Fidelity National Information Services (FIS - Free Report) . The company is benefiting from solid organic growth and continues to undertake initiatives in a bid to boost digital platforms like mobile banking. However, the firm continues to witness rising costs. Also, unsustainable capital-deployment activities and high debt level are concerns.

The company has been witnessing upward estimate revisions, reflecting analysts’ optimism about its growth prospects. Over the past 30 days, the Zacks Consensus Estimate for 2020 earnings moved around 1% north.

Fidelity National’s price performance is also encouraging. Shares of this Zacks Rank #3 (Hold) company have gained 3.3% in the past three months compared with the industry’s growth of 5.3%.



The company’s revenue growth story remains impressive as it witnessed a CAGR of 13.3% in the last five years (ended 2019) on its strong market position and a broad customer base. The rising trend which continued in the first six months of 2020 is anticipated to sustain on high recurring revenues from processing and maintenance, and several ongoing initiatives, including digital strategy.

Also, the company’s investments in mobile banking and innovative products, such as PayNet and BuyWay, are expected to open up significant growth opportunities for the long term.

Moreover, Fidelity’s inorganic growth strategies look impressive. In July 2019, it acquired Worldpay, which will likely support further revenue growth. The combined company expects to realize revenue synergies of $200 million and expense synergies of $700 million by the end of 2020.

However, rising expenses due to integration-related costs and investment in technology have hindered Fidelity’s bottom-line growth to some extent. The company witnessed a CAGR of 24.7% in the last five years (ended 2019), with the trend continuing in the first two quarters of 2020.

Further, consolidation in the banking sector and stiff competition from new entrants are key headwinds. Unsustainable capital-deployment activities due to volatile quarterly performance and high debt level are other concerns.

Stocks to Consider

TD Ameritrade Holding Corporation (AMTD - Free Report) has been witnessing upward estimate revisions for the past 60 days. Moreover, this Zacks #1 Ranked (Strong Buy) stock has rallied more than 10% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

E*TRADE Financial Corporation has been witnessing upward estimate revisions for the past 60 days. Further, the company’s shares have gained 26.5% in the past three months. At present, it carries a Zacks Rank of 2 (Buy).

Artisan Partners Asset Management Inc. (APAM - Free Report) has been witnessing upward estimate revisions for the past 60 days. Additionally, the stock has jumped 40% in three months’ time. It currently sports a Zacks Rank #1.

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