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Is Beat in Store for Fidelity National (FIS) in Q2 Earnings?

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Fidelity National Information Services (FIS - Free Report) is slated to announce second-quarter 2021 results on Aug 3, before the bell. The company’s earnings and revenues are anticipated to have grown year over year.

In the last reported quarter, the company’s earnings outpaced the Zacks Consensus Estimate. Strong liquidity position, lower expenses, rise in organic revenues and expanding margin were the tailwinds.

Fidelity delivered earnings surprises in three of the trailing four quarters and met in the other, the average beat being 3.10%.

The Zacks Consensus Estimate of $1.55 for the to-be-reported quarter earnings suggests a 34.8% jump from the year-ago reported number. Management projects net earnings per share between 55 cents and 65 cents. Adjusted earnings per share are expected to be in the band of $1.52-$1.55.


Major Factors at Play

Fidelity continues to benefit from the technology-driven operating backdrop. The company’s several payment solution platforms including Modern Banking Platform, RealNet and Payments One have been winning new clients, and might have supported its Banking Solutions unit. The Zacks Consensus Estimate for revenues under this unit is $1.57 billion, suggesting a 6.1% rise from the prior-year quarter.

During the second quarter, cross-border travel rebounded following the lifting of coronavirus-induced restrictions in several countries. Thus, demand for the company’s e-commerce payment gateway and new payments platform is likely to have risen. This, along with several other products and services that Fidelity offers to merchants internationally, is expected to have led to revenue growth. The consensus estimate for Merchant Solutions unit’s revenues is $1.11 billion, implying a jump of 36.3% year over year. The company expects organic revenue growth of 30-35% for the unit.

In April, Fidelity announced expansion of its payment processing capabilities in Malaysia, South Africa and Nigeria. Also, revenue synergies from the Worldpay deal (completed in July 2019) continued to aid financials.

The Zacks Consensus Estimate for total sales of $3.39 billion indicates 14.4% year-over-year increase. Fidelity expects GAAP revenues to be between $3.37 billion and $3.39 billion, i.e., increase in a range of 13-14% from prior-year quarter.

Further, as a result of high contribution margins in the business, management anticipates adjusted EBITDA margin to expand more than 400 basis points to roughly 44%. Adjusted EBITDA is estimated to be in the range of $1.46-$1.48 billion, suggesting year-over-year growth of 26-28%.

As the company steadily focuses on rolling out new innovative products in order to meet customers’ rising demand, expenses are likely to have risen.

What the Zacks Model Predicts

Our quantitative model predicts an earnings beat for Fidelity this time around. The combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — increases the odds of an earnings beat. This is just the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Fidelity +1.91%.

Zacks Rank: Fidelity currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Dates for Other Finance Stocks

BGC Partners, Inc. (BGCP - Free Report) and TriplePoint Venture Growth BDC Corp. (TPVG - Free Report) are scheduled to announce quarterly results on Aug 4, while Apollo Investment Corporation (AINV - Free Report) is slated to come out with results on Aug 5.