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Fiserv (FISV) Q2 Earnings: Will Higher Revenues, Tax Cut Aid?

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Fiserv, Inc. is scheduled to report second-quarter 2018 results on Jul 31, after market close.

While we expect the company’s top line to do well on the back of higher internal revenue growth and strong performance across majority of its segments, the bottom line is likely to be positively impacted by lower tax rates.

So far this year, shares of Fiserv have rallied 16.1%, significantly outperforming the Zacks S&P 500 Composite’s gain of 5.8%

 

Let’s check out the expectations in detail.

Strength Across Segments to Boost Revenues

The Zacks Consensus Estimate for second-quarter revenues is pegged at $1.42 billion, indicating a 2.3% year-over-year increase. The top line is expected to benefit from higher internal revenue growth and strong performance across the majority of its segments.

Revenues from Payments and Industry Products segment are likely to be driven by solid demand for Card Services, Biller Solutions businesses, Debit transaction, P2P transactions and Zelle transactions. The consensus estimate for this segment’s revenues is pegged at $834 million, indicating year-over-year growth of 7.1%. In first-quarter 2018, segment revenues increased 6.9% year over year to $770 million.

Financial Institution Services revenues segment are expected to suffer from the divestiture of the Australian item processing business and lower growth in the Lending business. The consensus mark for this segment’s revenues is pegged at $592 million, indicating year-over-year decline of 4.9%. In first-quarter 2018, segment revenues decreased 0.6% year over year to $616 million.

The Zacks Consensus Estimate for total processing and services revenues and product revenues is pegged at $1.20 billion and $202 million, indicating year-over-year growth of 1.3% and 1%, respectively. In first-quarter 2018, revenues from total processing and services increased 5.1% to $1.24 billion while product revenues declined 6.5% to $202 million on a year- over-year basis.

Fiserv, Inc. Revenue (TTM)

 

Fiserv, Inc. Revenue (TTM) | Fiserv, Inc. Quote

In first-quarter 2018, total revenues increased 3.3% to $1.44 billion. Internal revenue growth was 3%.

Earnings Likely to Grow on Tax Reform

The Zacks Consensus Estimate for earnings in the to-be-reported quarter is pegged at 74 cents per share, indicating year-over-year growth of 23.3%. Lower tax rates (Tax Cuts and Jobs Act), which reduced corporate tax rates significantly from 35% to 21%, are likely to boost Fiserv’s earnings.

In first-quarter 2018, adjusted earnings increased 22.5% to 76 cents per share.

Our Model Suggests a Beat

Per the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Fiserv has an Earnings ESP of +0.94% and a Zacks Rank #3, a combination that increases the odds of an earnings beat.

Key Picks

Here are a few stocks from the broader Business Services sector that investors may consider, as our model shows that these also have the right combination of elements to beat on earnings in second-quarter 2018:

Clean Harbors (CLH - Free Report) has an Earnings ESP of +1.67% and a Zacks Rank of 2. The company is scheduled to report quarterly numbers on Aug 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

ICF International (ICFI - Free Report) has an Earnings ESP of +0.11% and a Zacks Rank #2. The company is slated to report quarterly results on Aug 2.

Stericycle (SRCL - Free Report) has an Earnings ESP of +0.77% and a Zacks Rank #3. The company is slated to report quarterly results on Aug 2.

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