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Fiserv (FISV) Q2 Earnings In Line, Raises View for 2016
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Fiserv Inc.’s second-quarter 2016 adjusted earnings from continuing operations of $1.08 per share came in line with the Zacks Consensus Estimate. Earnings however improved 13.7% from the year-ago quarter
Total revenue increased approximately 5% year over year to $1.36 billion but missed the Zacks Consensus Estimate of $1.38 billion. Adjusted revenues grew 6% year over year to $1.29 billion.
Segment-wise, Payments and Industry Products adjusted revenues increased 8.8% year over year to $763 million. Financial Institution Services revenues were up 0.7% year over year to $612 million.
Internal revenues rose 4% driven by growth in Payments (up 7%) and Financial (up 1%) segments. Internal revenues had a negative impact of 80 basis points (bps) due to lower termination fees, EMV deferral and foreign currency impact.
Source-wise, total Processing and services revenues increased 4.5% on a year-over-year basis to $1.159 billion while Product revenues rose 7.9% year over year to $204 million.
Margins
Adjusted operating income increased to $413 million, up 5.9% from $390 million in the year-ago quarter. The company’s adjusted operating margin of 31.9% increased 10 bps on a year-over-year basis.
Other Financial Details
As of Jun 30, 2016, Fiserv had cash and cash equivalents of $263 million compared with $275 million as on Dec 31, 2015.
Fiserv’s cash from operating activities for the six-months ended Jun 30, 2016 was $687 million, up nearly 15% from the prior-year period. The company’s free cash flow came in at $442 million, an increase of 0.7% on a year-over-year basis. Long-term debt at quarter-end was $4.548 billion.
Fiserv repurchased 2.8 million shares for $283 million in the quarter. Fiserv had 11.2 million shares remaining for buyback as of Jun 30, 2016.
Guidance
For 2016, Fiserv now expects adjusted earnings per share in a range of $4.38 to $4.45, up from $4.32 to $4.44 projected earlier. This represents a growth rate of 13% to 15% over 2015 levels.
It continues to project adjusted internal revenues to increase 5% to 6%.
Our Take
Fiserv commands a leading position in the financial and payment solutions business backed by a broad customer base and key contract wins. Additionally, the strong user base of Mobiliti ASP remains a major growth driver. Moreover, the company expects revenues from base solutions like DNA, Agiliti, EMV and Now to drive growth.
In the second quarter, Fiserv extended its 16-year old credit processing contract with John Deere Financial, a division of Deere & Company (DE - Free Report) by another 10 years. This apart, the company added Bangkok Bank and Panin Bank to its client list in the quarter.
The company remains focused on expanding its product portfolio. In June, Fiserv launched a palm authentication biometric tool, Verifast, to enable banks and credit firms to reduce frauds and transaction time and improve branch service efficiency.
However, investors should keep in mind that increasing regulations in the banking and financial services industry and intensifying competition from the likes of Equifax Inc. (EFX - Free Report) , Fidelity National Information Services, Inc. (FIS - Free Report) and Global Payments Inc. remain concerns.
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Fiserv (FISV) Q2 Earnings In Line, Raises View for 2016
Fiserv Inc.’s second-quarter 2016 adjusted earnings from continuing operations of $1.08 per share came in line with the Zacks Consensus Estimate. Earnings however improved 13.7% from the year-ago quarter
Total revenue increased approximately 5% year over year to $1.36 billion but missed the Zacks Consensus Estimate of $1.38 billion. Adjusted revenues grew 6% year over year to $1.29 billion.
Segment-wise, Payments and Industry Products adjusted revenues increased 8.8% year over year to $763 million. Financial Institution Services revenues were up 0.7% year over year to $612 million.
Internal revenues rose 4% driven by growth in Payments (up 7%) and Financial (up 1%) segments. Internal revenues had a negative impact of 80 basis points (bps) due to lower termination fees, EMV deferral and foreign currency impact.
Source-wise, total Processing and services revenues increased 4.5% on a year-over-year basis to $1.159 billion while Product revenues rose 7.9% year over year to $204 million.
Margins
Adjusted operating income increased to $413 million, up 5.9% from $390 million in the year-ago quarter. The company’s adjusted operating margin of 31.9% increased 10 bps on a year-over-year basis.
Other Financial Details
As of Jun 30, 2016, Fiserv had cash and cash equivalents of $263 million compared with $275 million as on Dec 31, 2015.
Fiserv’s cash from operating activities for the six-months ended Jun 30, 2016 was $687 million, up nearly 15% from the prior-year period. The company’s free cash flow came in at $442 million, an increase of 0.7% on a year-over-year basis. Long-term debt at quarter-end was $4.548 billion.
Fiserv repurchased 2.8 million shares for $283 million in the quarter. Fiserv had 11.2 million shares remaining for buyback as of Jun 30, 2016.
Guidance
For 2016, Fiserv now expects adjusted earnings per share in a range of $4.38 to $4.45, up from $4.32 to $4.44 projected earlier. This represents a growth rate of 13% to 15% over 2015 levels.
It continues to project adjusted internal revenues to increase 5% to 6%.
Our Take
Fiserv commands a leading position in the financial and payment solutions business backed by a broad customer base and key contract wins. Additionally, the strong user base of Mobiliti ASP remains a major growth driver. Moreover, the company expects revenues from base solutions like DNA, Agiliti, EMV and Now to drive growth.
In the second quarter, Fiserv extended its 16-year old credit processing contract with John Deere Financial, a division of Deere & Company (DE - Free Report) by another 10 years. This apart, the company added Bangkok Bank and Panin Bank to its client list in the quarter.
The company remains focused on expanding its product portfolio. In June, Fiserv launched a palm authentication biometric tool, Verifast, to enable banks and credit firms to reduce frauds and transaction time and improve branch service efficiency.
However, investors should keep in mind that increasing regulations in the banking and financial services industry and intensifying competition from the likes of Equifax Inc. (EFX - Free Report) , Fidelity National Information Services, Inc. (FIS - Free Report) and Global Payments Inc. remain concerns.
Currently, Fiserv has a Zacks Rank #3 (Hold).
FISERV INC Price, Consensus and EPS Surprise
FISERV INC Price, Consensus and EPS Surprise | FISERV INC Quote
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