Back to top

Image: Bigstock

Fiserv (FISV) Rides on Buyouts, Savings Amid Integration Risks

Read MoreHide Full Article

Fiserv, Inc. is currently riding on its size and scale of operations, cost reduction efforts and strategic acquisitions. The company’s shares have gained 7.6% over the past six months, outperforming the 3.5% rally of the industry it belongs to.

Fiserv recently reported fourth-quarter 2020 adjusted earnings of $1.30 per share that beat the Zacks Consensus Estimate by 0.8%. Adjusted revenues of $3.62 billion missed the consensus estimate by 3.6%.

Focus on Quality, Strategic Acquisitions

Fiserv continues to focus on improving product and service quality through leveraging its size and scale of operations, reducing costs and effectively integrating First Data operations. The company is streamlining its overall cost structure through rationalization of duplicate costs to attain planned cost synergies. The company has implemented more than $1 billion of cost savings by December 2020.

Fiserv continues to expand its product portfolio through strategic acquisitions. On Jan 22, the company announced completion of the acquisition of Ondot Systems which is expected to enhance its digital capabilities, strengthening its competitive position. In 2020, the company acquired MerchantPro Express, Bypass Mobile and Inlet. While MerchantPro expands its merchant services business, Bypass enhances its omni-commerce capabilities and Inlet boosts its digital bill payment strategy. 

Fiserv has been consistent with share repurchases. During 2020, Fiserv repurchased 16.1 million shares for $1.64 billion. During 2019, the company repurchased 4.2 million shares for $394 million. In 2018 and 2017, the company had repurchased shares worth $1.91 billion and $1.17 billion, respectively. Such moves instill investors’ confidence and positively impact earnings per share.

Competition, Integration Risks Stay

Going forward, competition is anticipated to increase as market entrants multiply in number and the existing ones expand their product lines and services with updated technologies to attract customers and retain the existing ones. Maintaining strong and long-term client relationships is a difficult task amid stiff competition.

Fiserv’s policy of acquiring a large number of companies results in some integration risk. Acquisitions can negatively impact its balance sheet in the form of a high level of goodwill and intangible assets, which accounted for more than 70% of total assets at the end of 2020. Moreover, frequent acquisitions are a distraction for management, which could impact organic growth.

Zacks Rank and Key Picks

Currently, Fiserv has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Business Services sector are The Interpublic Group of Companies, (IPG - Free Report) , Gartner (IT - Free Report)  and NV5 Global (NVEE - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term expected earnings per share (three to five years) growth rate for Interpublic, Gartner and NV5 Global is pegged at 2.4%, 13.5% and 18%, respectively.

The Hottest Tech Mega-Trend of All

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Interpublic Group of Companies, Inc. (The) (IPG) - free report >>

Gartner, Inc. (IT) - free report >>

NV5 Global, Inc. (NVEE) - free report >>

Published in