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Fidelity (FIS) to Report Q4 Earnings: What's in the Cards?
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Fidelity National Information Services (FIS - Free Report) is scheduled to release fourth-quarter and 2021 earnings on Feb 15, before the opening bell. FIS’s revenues and earnings are anticipated to indicate growth from the year-ago reported figure.
In the last reported quarter, Fidelity’s earnings surpassed the Zacks Consensus Estimate. Notable increases in margin and organic revenue growth were tailwinds. However, a rising expense base posed a major drag.
Fidelity delivered earnings surprises in all of the trailing four quarters, the average beat being 3.68%.
Fidelity National Information Services, Inc. Price and EPS Surprise
Prior to the fourth-quarter earnings release, Fidelity is witnessing a downward estimate revision, indicating analysts’ bearish sentiments. The Zacks Consensus Estimate for the fourth-quarter earnings has been revised 1.1% downward to $1.89 over the past month. Nonetheless, the figure suggests growth of 16.7% from the prior-year quarter’s reported number. Also, the Zacks Consensus Estimate for revenues of $3.71 billion indicates an 11.8% jump from the year-earlier period’s reading.
Key Development During the Quarter
In November 2021, Fidelity announced an updated capital-deployment strategy that highlighted its priority in investing in the business to steer growth as well as return capital to its shareholders. It announced plans to target high-growth assets and innovative solutions across core markets and maintain ample financial capacity for inorganic moves in the long term.
Fidelity intends to boost its expected annual dividend growth rate to 20% per year, resulting in an incremental dividend payment of nearly $100 million in 2022. This amplified dividend growth rate will support FIS to gradually accelerate its dividend payout ratio to nearly 35% of adjusted net earnings over several years from nearly 25% in 2021.
Factors to Note
Fidelity is expected to have continued benefiting from the digital transformation in the global economy as well as the increasing investments in mobile banking, innovative products and the financial infrastructure during the fourth quarter.
FIS’ several payment solution platforms, including Modern Banking Platform, RealNet and Payments One, have been winning new clients for a while and are likely to have supported its Banking Solutions unit revenues. The Zacks Consensus Estimate for fourth-quarter revenues from this unit is $1.67 billion, suggesting a 7.9% rise from the prior-year quarter’s reported figure.
Although the pandemic is expected to have impacted travel trends, cross-border travel is likely to have rebounded comparatively, following the relaxation of previous restrictions in several countries. Demand for Fidelity’s e-commerce payment gateway and the new payments platform is anticipated to have shot up. This, along with several other products and services that Fidelity offers to merchants internationally, is expected to have boosted revenue growth.
The consensus mark for Merchant Solutions unit’s revenues of $1.25 billion suggests a jump of 24% from the figure reported in the year-ago quarter.
Moreover, Fidelity had closed the deal to acquire Worldpay, a leading payment processing company, in 2019. The deal has been creating significant cost and revenue synergies for FIS. As of the third-quarter end, FIS had already achieved revenue synergies worth $600 million and cost synergies of approximately $875 million on an annual run-rate basis. Fidelity is expected to have continued realizing these synergies in the fourth quarter as well, given its target to realize aggregate $700 million of annual run-rate revenue synergy and $900 million of annual run-rate expense synergy by 2021 end.
However, Fidelity’s focus on rolling out innovative products to meet customers’ rising demand might have inflated expenses during the quarter under review.
2021 Management Guidance
Management expects GAAP revenues between $13.9 billion and $14 billion. Organic revenues are expected to increase 10-11%.
Fidelity expects earnings per share (EPS) on a GAAP basis to be 70-80 cents. Adjusted EPS is expected to be $6.50-$6.60, indicating growth of 19-21% from the year-ago reported figure.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) are projected in the range of $6.13-$6.2 billion. Adjusted EBITDA margin is expected to expand 220-240 basis points to 44-45% in 2021.
The Merchant solutions unit is expected to witness mid-to-high-teen organic revenue growth from the 2019 reported figure on a pro-forma basis.
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 a Zacks Rank #3 (Hold) or higher — increases the odds of an earnings beat, which 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: Fidelity has an Earnings ESP of +0.62%.
Zacks Rank: Fidelity currently carries a Zacks Rank of 3.
Other Stocks to Consider
Some other finance stocks worth considering with the right combination of elements to beat on earnings in their upcoming releases per our model are BanColombia (CIB - Free Report) , HSBC Holdings plc (HSBC - Free Report) and NatWest Group (NWG - Free Report) .
BanColombia has an Earnings ESP of +5.56% and a Zacks Rank #2 (Buy) at present. CIB is scheduled to report quarterly numbers on Feb 23.
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Fidelity (FIS) to Report Q4 Earnings: What's in the Cards?
Fidelity National Information Services (FIS - Free Report) is scheduled to release fourth-quarter and 2021 earnings on Feb 15, before the opening bell. FIS’s revenues and earnings are anticipated to indicate growth from the year-ago reported figure.
In the last reported quarter, Fidelity’s earnings surpassed the Zacks Consensus Estimate. Notable increases in margin and organic revenue growth were tailwinds. However, a rising expense base posed a major drag.
Fidelity delivered earnings surprises in all of the trailing four quarters, the average beat being 3.68%.
Fidelity National Information Services, Inc. Price and EPS Surprise
Fidelity National Information Services, Inc. price-eps-surprise | Fidelity National Information Services, Inc. Quote
Prior to the fourth-quarter earnings release, Fidelity is witnessing a downward estimate revision, indicating analysts’ bearish sentiments. The Zacks Consensus Estimate for the fourth-quarter earnings has been revised 1.1% downward to $1.89 over the past month. Nonetheless, the figure suggests growth of 16.7% from the prior-year quarter’s reported number. Also, the Zacks Consensus Estimate for revenues of $3.71 billion indicates an 11.8% jump from the year-earlier period’s reading.
Key Development During the Quarter
In November 2021, Fidelity announced an updated capital-deployment strategy that highlighted its priority in investing in the business to steer growth as well as return capital to its shareholders. It announced plans to target high-growth assets and innovative solutions across core markets and maintain ample financial capacity for inorganic moves in the long term.
Fidelity intends to boost its expected annual dividend growth rate to 20% per year, resulting in an incremental dividend payment of nearly $100 million in 2022. This amplified dividend growth rate will support FIS to gradually accelerate its dividend payout ratio to nearly 35% of adjusted net earnings over several years from nearly 25% in 2021.
Factors to Note
Fidelity is expected to have continued benefiting from the digital transformation in the global economy as well as the increasing investments in mobile banking, innovative products and the financial infrastructure during the fourth quarter.
FIS’ several payment solution platforms, including Modern Banking Platform, RealNet and Payments One, have been winning new clients for a while and are likely to have supported its Banking Solutions unit revenues. The Zacks Consensus Estimate for fourth-quarter revenues from this unit is $1.67 billion, suggesting a 7.9% rise from the prior-year quarter’s reported figure.
Although the pandemic is expected to have impacted travel trends, cross-border travel is likely to have rebounded comparatively, following the relaxation of previous restrictions in several countries. Demand for Fidelity’s e-commerce payment gateway and the new payments platform is anticipated to have shot up. This, along with several other products and services that Fidelity offers to merchants internationally, is expected to have boosted revenue growth.
The consensus mark for Merchant Solutions unit’s revenues of $1.25 billion suggests a jump of 24% from the figure reported in the year-ago quarter.
Moreover, Fidelity had closed the deal to acquire Worldpay, a leading payment processing company, in 2019. The deal has been creating significant cost and revenue synergies for FIS. As of the third-quarter end, FIS had already achieved revenue synergies worth $600 million and cost synergies of approximately $875 million on an annual run-rate basis. Fidelity is expected to have continued realizing these synergies in the fourth quarter as well, given its target to realize aggregate $700 million of annual run-rate revenue synergy and $900 million of annual run-rate expense synergy by 2021 end.
However, Fidelity’s focus on rolling out innovative products to meet customers’ rising demand might have inflated expenses during the quarter under review.
2021 Management Guidance
Management expects GAAP revenues between $13.9 billion and $14 billion. Organic revenues are expected to increase 10-11%.
Fidelity expects earnings per share (EPS) on a GAAP basis to be 70-80 cents. Adjusted EPS is expected to be $6.50-$6.60, indicating growth of 19-21% from the year-ago reported figure.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) are projected in the range of $6.13-$6.2 billion. Adjusted EBITDA margin is expected to expand 220-240 basis points to 44-45% in 2021.
The Merchant solutions unit is expected to witness mid-to-high-teen organic revenue growth from the 2019 reported figure on a pro-forma basis.
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 a Zacks Rank #3 (Hold) or higher — increases the odds of an earnings beat, which 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: Fidelity has an Earnings ESP of +0.62%.
Zacks Rank: Fidelity currently carries a Zacks Rank of 3.
Other Stocks to Consider
Some other finance stocks worth considering with the right combination of elements to beat on earnings in their upcoming releases per our model are BanColombia (CIB - Free Report) , HSBC Holdings plc (HSBC - Free Report) and NatWest Group (NWG - Free Report) .
BanColombia has an Earnings ESP of +5.56% and a Zacks Rank #2 (Buy) at present. CIB is scheduled to report quarterly numbers on Feb 23.
HSBC is scheduled to report quarterly results on Feb 22. HSBC currently has an Earnings ESP of +11.11% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NatWest Group has an Earnings ESP of +90.91% and a Zacks Rank #3 at present. NWG is scheduled to report quarterly numbers on Feb 18.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.