It has been about a month since the last earnings report for First Data . Shares have added about 8.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is First Data due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
First Data Q2 Earnings Beat, 2018 Revenue View Up
First Data reported strong second-quarter 2018 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate.
Adjusted earnings of 39 cents per share beat the consensus mark by 2 cents but fell short of the year-ago figure by a penny. The bottom line was hurt by the normalization of adjusted effective tax rate, which was, however, offset by improved operating performance.
Total segment revenues of $2.23 billion beat the consensus estimate by $46.7 million. The top line was up 11% year over year on a reported basis, 9% on a comparable accounting basis and 6% on an organic constant currency basis. Impacted by the adoption of ASC 606, consolidated revenues were down 19% year over year to $2.45 billion. The top line benefited from strength across all key businesses. With 94 new ISVs in the quarter, the ISV business recorded more than 50% revenue growth.
Segments in Detail
Global Business Solutions segment generated revenues of $1.45 billion, which grew 18% year over year on a reported basis, 14% on a comparable accounting basis and 8% on an organic constant currency basis. Growth was driven by strong geographical market results across Latin America, Europe, Middle East and Africa (EMEA) and Asia Pacific (APAC) regions. Strong growth in Argentina and Brazil drove Latin America revenues. APAC revenues were driven by solid growth throughout the region.
Global Financial Solutions: Revenues from this segment came in at $414 million, up 3% year over year on a reported basis, 2% on a comparable accounting basis and 4% on an organic constant-currency basis. The improvement can be attributed to higher revenues from Latin America, EMEA and APAC, partially offset by lower revenues from North America.
Network & Security Solutions: This segment generated revenues of $371 million, down 3% year over year on a reported basis, up 1% on a comparable accounting basis and 3% on an organic constant currency basis. The upside was driven by strength across the Stored Value, Security and Fraud, and EFT units, which was, partially offset by lower revenues in TeleCheck.
Operating Results
Total segment EBITDA came in at $864 million, up 10% year over year on a reported basis, 10% on a comparable accounting basis and 8% on an organic constant currency basis. Segment EBITDA margin of 38.7% improved18 bps year over year on a comparable accounting basis and 78 bps on an organic constant currency basis.
Operating profit increased 15.2% year over year to $538 million. Operating profit margin climbed to 24.1% from 23.2% in the prior-year quarter. Total expenses declined 25.3% from the year-ago quarter to $1.91 billion.
Balance Sheet & Cash Flow
First Data exited the second quarter with cash and cash equivalents of $544 million compared with $586 million at the end of the prior quarter. Long-term debt was $17.7 billion compared with $17.9 billion at the end of the prior quarter.
The company generated $604 million of cash from operating activities in the reported quarter. Free cash flow was $378 million. Capital expenditures were $151 million.
2018 Guidance
First Data raised its full year 2018 guidance for segment revenue growth. The company now expects segment revenue to register 7% to 8% growth compared with the previously guided growth range of 6-7%. Both the expectations are inclusive of a net benefit of around 2 percentage points, attributable to the full-year impact of closed major acquisitions and dispositions.
Full-year guidance for segment EBITDA growth, adjusted earnings and free cash flow has been reaffirmed. Total segment EBITDA is expected to register of 8-10% growth. Free cash flow is anticipated to exceed $1.4 billion. Adjusted earnings are expected in the range of $1.42-$1.47 per share.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months.
VGM Scores
Currently, First Data has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
First Data has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is First Data (FDC) Up 8.7% Since Last Earnings Report?
It has been about a month since the last earnings report for First Data . Shares have added about 8.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is First Data due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
First Data Q2 Earnings Beat, 2018 Revenue View Up
First Data reported strong second-quarter 2018 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate.
Adjusted earnings of 39 cents per share beat the consensus mark by 2 cents but fell short of the year-ago figure by a penny. The bottom line was hurt by the normalization of adjusted effective tax rate, which was, however, offset by improved operating performance.
Total segment revenues of $2.23 billion beat the consensus estimate by $46.7 million. The top line was up 11% year over year on a reported basis, 9% on a comparable accounting basis and 6% on an organic constant currency basis. Impacted by the adoption of ASC 606, consolidated revenues were down 19% year over year to $2.45 billion. The top line benefited from strength across all key businesses. With 94 new ISVs in the quarter, the ISV business recorded more than 50% revenue growth.
Segments in Detail
Global Business Solutions segment generated revenues of $1.45 billion, which grew 18% year over year on a reported basis, 14% on a comparable accounting basis and 8% on an organic constant currency basis. Growth was driven by strong geographical market results across Latin America, Europe, Middle East and Africa (EMEA) and Asia Pacific (APAC) regions. Strong growth in Argentina and Brazil drove Latin America revenues. APAC revenues were driven by solid growth throughout the region.
Global Financial Solutions: Revenues from this segment came in at $414 million, up 3% year over year on a reported basis, 2% on a comparable accounting basis and 4% on an organic constant-currency basis. The improvement can be attributed to higher revenues from Latin America, EMEA and APAC, partially offset by lower revenues from North America.
Network & Security Solutions: This segment generated revenues of $371 million, down 3% year over year on a reported basis, up 1% on a comparable accounting basis and 3% on an organic constant currency basis. The upside was driven by strength across the Stored Value, Security and Fraud, and EFT units, which was, partially offset by lower revenues in TeleCheck.
Operating Results
Total segment EBITDA came in at $864 million, up 10% year over year on a reported basis, 10% on a comparable accounting basis and 8% on an organic constant currency basis. Segment EBITDA margin of 38.7% improved18 bps year over year on a comparable accounting basis and 78 bps on an organic constant currency basis.
Operating profit increased 15.2% year over year to $538 million. Operating profit margin climbed to 24.1% from 23.2% in the prior-year quarter. Total expenses declined 25.3% from the year-ago quarter to $1.91 billion.
Balance Sheet & Cash Flow
First Data exited the second quarter with cash and cash equivalents of $544 million compared with $586 million at the end of the prior quarter. Long-term debt was $17.7 billion compared with $17.9 billion at the end of the prior quarter.
The company generated $604 million of cash from operating activities in the reported quarter. Free cash flow was $378 million. Capital expenditures were $151 million.
2018 Guidance
First Data raised its full year 2018 guidance for segment revenue growth. The company now expects segment revenue to register 7% to 8% growth compared with the previously guided growth range of 6-7%. Both the expectations are inclusive of a net benefit of around 2 percentage points, attributable to the full-year impact of closed major acquisitions and dispositions.
Full-year guidance for segment EBITDA growth, adjusted earnings and free cash flow has been reaffirmed. Total segment EBITDA is expected to register of 8-10% growth. Free cash flow is anticipated to exceed $1.4 billion. Adjusted earnings are expected in the range of $1.42-$1.47 per share.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months.
VGM Scores
Currently, First Data has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
First Data has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.