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Fiserv (FISV) Q3 Earnings Top Estimates But Revenues Falter

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Fiserv Inc.’s third-quarter 2016 adjusted earnings from continuing operations of $1.14 per share came ahead of the Zacks Consensus Estimate by a cent and improved 10.7% from the year-ago quarter.

Total revenue increased approximately 5.1% year over year to $1.38 billion but missed the Zacks Consensus Estimate of $1.40 billion. Adjusted revenues grew 5% year over year to $1.31 billion.

 

 

Segment-wise, Payments and Industry Products adjusted revenues increased 9% year over year to $701 million. Financial Institution Services revenues were up 1.8% year over year to $624 million.

 

Internal revenues rose 4% owing to growth in Payments (up 5%) and Financial (up 2%) segments.

Source-wise, total Processing and services revenues increased 3.1% on a year-over-year basis to $1.160 billion while Product revenues rose 17% year over year to $220 million.

Mobiliti ASP subscribers increased 34% year over year to 5.2 million while it added five big DNA clients.

Margins

Adjusted operating income increased to $429 million, up 4.4% from $411 million in the year-ago quarter. The company’s adjusted operating margin of 32.8% decreased 30 basis points (bps) on a year-over-year basis.

Other Financial Details

As of Sep 30, 2016, Fiserv had cash and cash equivalents of $303 million compared with $275 million as on Dec 31, 2015. Long-term debt at quarter-end was $4.624 billion.

Fiserv’s cash from operating activities for the nine-months ended Sep 30, 2016 was $1.04 billion, up nearly 9.1% from the prior-year period. The company’s free cash flow grew 12% to $747 million.

Fiserv bought back 3.1 million shares for $329 million in the quarter taking total count to 9.3 million shares worth $933 million for first nine months of the current year. Fiserv had 8.1 million shares remaining for buyback as of Sep 30, 2016.

Guidance

For 2016, Fiserv now expects adjusted earnings per share in a range of $4.43 to $4.46, up from $4.38 to $4.45 projected earlier, representing growth rate of 14% to 15% year over year.

Adjusted internal revenue growth is now expected to be 4% compared with an increase of 5% to 6% projected earlier.

FISERV INC Price, Consensus and EPS Surprise

FISERV INC Price, Consensus and EPS Surprise | FISERV INC Quote

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. The company remains focused on expanding its product portfolio.

However, the company’s sales are being negatively impacted due to lower termination fees, EMV deferral and adverse foreign currency translations. Plus, 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 (GPN - Free Report)   remain concerns.

Currently, Fiserv carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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