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Fidelity (FIS) Tops Q2 Earnings & Revenues Estimates, Ups View

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Fidelity National Information Services’ (FIS - Free Report) second-quarter 2021 adjusted net earnings per share were $1.61, surpassing the Zacks Consensus Estimate of $1.55. Also, the bottom line compared favorably with the year-ago quarter figure of $1.15.

Notable increase in margin and organic revenue growth were positives. Given the robust activity in terms of new sales and an expanding backlog of revenue under contract in the June-end quarter, the company improved its guidance for 2021. However, flaring expenses posed a major concern.

On a GAAP basis, the company reported net earnings attributable to common stockholders of $341 million or 55 cents per share compared with $19 million or 3 cents per share in the prior-year quarter.

Organic Revenues Rise, Expenses Increase

Revenues in the quarter were $3.48 billion, up 17% year over year. Also, the top line surpassed the Zacks Consensus Estimate of $3.39 billion. Organic revenues increased 16% in the quarter on higher growth across all three operating segments.

Segment-wise, Merchant Solutions’ revenues climbed 45% to $1.18 billion. Revenues from Banking Solutions rose 8% to $1.58 million. Capital Market Solutions’ revenues jumped 6% to $630 million.

Selling, general and administrative expenses were $977 million, up 16.3% year over year.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) increased to $1.52 billion from $1.15 billion in the year-ago quarter. Adjusted EBITDA margin expanded 460 basis points to 43.7%.

Balance Sheet & Cash Flow

As of Jun 30, 2021, cash and cash equivalents were $1.30 billion compared with $1.96 billion as of Dec 31, 2020. Debt outstanding was $19.4 billion.

In the second quarter, net cash provided by operations was $1 billion. The company reported a free cash flow of $1 billion.

It paid out dividends worth $242 million in the reported quarter and repurchased 2.7 million shares for $400 million.

Guidance

Third Quarter

Fidelity expects GAAP revenues between $3.49 billion and $3.52 billion. The company expects to report earnings per share between 40 cents and 50 cents. Adjusted earnings per share are expected to be $1.66-$1.69.

Full Year

For 2021, GAAP revenues are projected to be between $13.9 billion and $14 billion. The company expects to report earnings per share of $1.20-$1.45. Adjusted earnings per share are expected to be $6.45-$6.60.

Our Viewpoint

Fidelity’s better-than-expected second-quarter results were supported by higher revenue growth across all three operating segments.The company remains well-poised for growth, backed by its attractive core business, with many ongoing initiatives and a broad customer base. Also, higher investments in mobile banking and innovative products are expected to support Fidelity's growth over the long term.

The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Companies

Lazard Ltd (LAZ - Free Report) reported second-quarter 2021 adjusted earnings of $1.28 per share, beating the Zacks Consensus Estimate of 89 cents. The reported figure also reflected 91% year-over-year growth.

Federated Hermes (FHI - Free Report) reported second-quarter 2021 earnings per share of 67 cents, in line with the Zacks Consensus Estimate. The figure, however, compared unfavorably with the prior-year quarter earnings of 80 cents.

Cullen/Frost Bankers, Inc. (CFR - Free Report) reported second-quarter earnings per share of $1.80, surpassing the Zacks Consensus Estimate of $1.60. Results also compared favorably with the prior-year quarter figure of $1.47 per share.