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Fidelity (FIS) Q1 Earnings Beat Estimates, Revenues Rise Y/Y

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Fidelity National Information Services, Inc. (FIS - Free Report) reported first-quarter 2022 adjusted earnings per share (EPS) of $1.47, surpassing the Zacks Consensus Estimate of $1.46. Also, the bottom line compared favorably with the year-ago quarter’s figure of $1.30.

Organic revenues saw notable growth in the quarter. Continued recovery in the global economy from the ongoing pandemic also supported the performance. However, a rise in selling, general and administrative expenses was a hurdle.

On a GAAP basis, first-quarter net earnings attributable to common stockholders stood at $120 million or 20 cents per share, against a net loss of $373 million or 60 cents per share in the prior-year quarter.

Organic Revenues Rise, Expenses Increase

First-quarter 2022 revenues were $3.49 billion, up 8% year over year. Moreover, the top line beat the Zacks Consensus Estimate of $3.44 billion. Organic revenues increased 9% in the quarter on higher growth across all operating segments.

Segment-wise, Merchant Solutions’ revenues climbed 15% to $1.11 billion. Revenues from Banking Solutions rose 7% to $1.65 million. Capital Market Solutions’ revenues jumped 5% to $658 million, while Corporate and Other segment’s revenues declined 16% to $77 million.

Selling, general and administrative expenses were $1.04 billion, up 2.9% year over year.

Adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) increased 8% to $1.42 billion from the year-ago quarter’s level. The adjusted EBITDA margin was flat at 40.6%.

Balance Sheet & Cash Flow

As of Mar 31, 2022, cash and cash equivalents were $1.55 billion, down from $2.01 billion as of Dec 31, 2021. The outstanding debt was $19.2 billion.

In the first quarter, net cash provided by operations was $896 million. FIS reported a free cash flow of $786 million.

Capital Deployment

FIS increased its quarterly dividend by 21% as compared with the prior-year period to 47 cents per share, paying a total of $287 million in dividends during the first quarter.

In addition, it continued to reduce leverage, which will enable the resumption of share repurchase under its existing $100-million share authorization during the second quarter.

Guidance

Management expects second-quarter 2022 GAAP revenues between $3.65 billion and $3.69 billion. 2022 GAAP revenues are expected between $14.78 billion and $14.93 billion.

Fidelity envisions second-quarter 2022 EPS (GAAP basis) in the range of 40-50 cents. Second-quarter 2022 adjusted EPS is projected to be $1.72-$1.75.

FIS expects 2022 EPS (GAAP basis) to be in the $2.10-$2.50 range, while 2022 adjusted EPS is predicted to be $7.25-$7.37.

FIS currently expects to primarily utilize free cash flow through the end of 2023 to return capital to shareholders. During 2022, the company expects to repurchase shares worth approximately $3 billion, primarily during the second half of the year.

Our Viewpoint

Fidelity’s impressive first-quarter results were supported by higher revenue growth across all three operating segments. FIS remains well-poised for growth, backed by its attractive core business, with many ongoing initiatives and a broad customer base.

With strong cash flows, Fidelity’s capital allocation strategy is likely to be sustainable. Also, higher investments in mobile banking and innovative products are expected to support its growth over the long term.

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

Performance of Other Companies

First Horizon National Corporation’s (FHN - Free Report) first-quarter 2022 adjusted earnings per share of 38 cents beat the Zacks Consensus Estimate of 34 cents. However, the figure declined 25% year over year. Results excluded after-tax impacts of 4 cents per share from notable items related to the IBERIABANK Corporation and TD-Bank merger transactions.

First Horizon’s results reflect higher loan balance, provision benefits and declining expenses. However, declines in net interest income (“NII”) and fee income affected revenues. Also, pressure on margin due to low interest rates was a spoilsport for FHN.

M&T Bank Corporation (MTB - Free Report) reported net operating earnings per share of $2.73 in first-quarter 2022, surpassing the Zacks Consensus Estimate of $2.26. However, MTB’s bottom line compares unfavorably with $3.41 per share reported in the year-ago period.

A rise in non-interest income and a strong capital position were tailwinds for M&T Bank. However, a fall in NII and net interest margin, and a rise in expenses were the key undermining factors.

Fifth Third Bancorp (FITB - Free Report) reported first-quarter 2022 earnings (excluding after-tax impacts of certain items) of 69 cents per share, missing the Zacks Consensus Estimate of 70 cents. Including the impacts of these items, earnings per share were 68 cents, indicating a 27% year-over-year decline.

Fifth Third’s performance displays a revenue decline, primarily due to a fall in fee income. Margin contraction and capital position deterioration played spoilsports for FITB.