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Here's Why You Should Hold on to Fidelity National (FIS) Stock
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Fidelity National Information Services, Inc. (FIS - Free Report) is well-poised to grow on the back of its Future Forward initiative, rising demand for digital payment solutions, a healthy product portfolio and modernization efforts. The growing global e-commerce market holds tremendous opportunity for the company.
Fidelity National — with a market cap of $34.4 billion — provides banking and payments technology solutions, processing services and information-based services to the financial services industry. Courtesy of solid prospects, this stock is worth holding on to at the moment.
Zacks Rank & Price Performance
FIS currently carries a Zacks Rank #3 (Hold). In the past three months, the stock has gained 8% compared with the industry’s growth of 5.6%.
Image Source: Zacks Investment Research
2024 Estimates & Surprise History
The Zacks Consensus Estimate for FIS’ 2024 earnings is pegged at $6.52 per share, indicating a 9.5% increase from the year-ago estimated figure on 3.4% higher revenues of $15 billion.
The company's earnings beat estimates in three of the last four quarters and missed the mark once, delivering an average surprise of 2.3%.
Growth Drivers
Fidelity National is benefiting from strong recurring revenue growth across all its segments. Strong execution and improving accounts should continue to fuel top-line growth in the Banking Segment. The company expects banking organic revenues to grow between 0% and 2% in 2023. Moreover, the recent banking uncertainty is boding well for FIS, leading to growth in accounts on file serviced on its platforms and hence rising banking revenues.
The company continued to benefit from increasing Capital Market revenues in the first quarter of 2023. It expects revenues in this segment to grow in the range of 4-6% in 2023. The company’s continued investments in emerging platforms like artificial intelligence and blockchain technology should continue to add value to its services.
The company focuses on top-tier strategic partnerships and future-proof underlying technologies to grow its operations. The company’s growing footprint in the crypto market is praiseworthy. It has partnered with cryptocurrency platforms like Crypto.com and OKCoin to support their respective global expansions. Further, its partnership with bitcoin-focused financial services and technology provider NYDIG is likely to increase traffic to its Digital One Mobile application.
Fidelity National often undertakes shareholder value-boosting measures. In the first quarter, the company returned $300 million to shareholders in the form of dividends. The company aims to maintain 35% dividend payout ratio in 2023 and expects to achieve targeted annual dividend growth parallel with adjusted net earnings growth. It has a dividend yield of 3.6%, higher than the industry’s average of 0.7%.
The company does not move away from shedding non-core assets to boost efficiency and profitability. Currently, it has plans to opt for a tax-free spin-off of its Merchant Solutions business. This is expected to complete by early 2024.
FIS’s valuation seems cheaper than the industry at the current level. Looking at its 12-month forward price-to-earnings multiple, investors might want to pay a higher premium. FIS currently has a ratio of 9.3X, much lower than the industry’s average of 21.3X.
Key Concerns
There are a few factors that are impeding the stock’s growth lately.
Increasing costs are dampening its profits. Selling, general and administrative expenses witnessed a CAGR of 26% over the last five years that ended in 2022. The growing costs due to a multi-year modernization of platforms and applications are anticipated to keep its margins under pressure. Nevertheless, we believe that a systematic and strategic plan of action bodes well for the long run.
The Zacks Consensus Estimate for WEX’s 2023 earnings indicates a 3.8% increase from the prior-year reported number. Also, the consensus mark for 2023 revenues indicates 5.8% growth. WEX’s earnings beat estimates in each of the last four quarters, the average surprise being 5.4%.
The Zacks Consensus Estimate for Visa’s 2023 earnings indicates a 14.4% increase from the prior-year reported number. Also, the consensus mark for 2023 revenues indicates 11% growth. V’s earnings beat estimates in each of the last four quarters, the average surprise being 8%.
The Zacks Consensus Estimate for Paysafe’s 2023 earnings is pegged at $2.2 per share, which witnessed one upward estimate revision over the past 60 days against none in the opposite direction. PSFE’s earnings beat estimates in three of the last four quarters and missed once, the average surprise being 190.5%.
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Here's Why You Should Hold on to Fidelity National (FIS) Stock
Fidelity National Information Services, Inc. (FIS - Free Report) is well-poised to grow on the back of its Future Forward initiative, rising demand for digital payment solutions, a healthy product portfolio and modernization efforts. The growing global e-commerce market holds tremendous opportunity for the company.
Fidelity National — with a market cap of $34.4 billion — provides banking and payments technology solutions, processing services and information-based services to the financial services industry. Courtesy of solid prospects, this stock is worth holding on to at the moment.
Zacks Rank & Price Performance
FIS currently carries a Zacks Rank #3 (Hold). In the past three months, the stock has gained 8% compared with the industry’s growth of 5.6%.
Image Source: Zacks Investment Research
2024 Estimates & Surprise History
The Zacks Consensus Estimate for FIS’ 2024 earnings is pegged at $6.52 per share, indicating a 9.5% increase from the year-ago estimated figure on 3.4% higher revenues of $15 billion.
The company's earnings beat estimates in three of the last four quarters and missed the mark once, delivering an average surprise of 2.3%.
Growth Drivers
Fidelity National is benefiting from strong recurring revenue growth across all its segments. Strong execution and improving accounts should continue to fuel top-line growth in the Banking Segment. The company expects banking organic revenues to grow between 0% and 2% in 2023. Moreover, the recent banking uncertainty is boding well for FIS, leading to growth in accounts on file serviced on its platforms and hence rising banking revenues.
The company continued to benefit from increasing Capital Market revenues in the first quarter of 2023. It expects revenues in this segment to grow in the range of 4-6% in 2023. The company’s continued investments in emerging platforms like artificial intelligence and blockchain technology should continue to add value to its services.
The company focuses on top-tier strategic partnerships and future-proof underlying technologies to grow its operations. The company’s growing footprint in the crypto market is praiseworthy. It has partnered with cryptocurrency platforms like Crypto.com and OKCoin to support their respective global expansions. Further, its partnership with bitcoin-focused financial services and technology provider NYDIG is likely to increase traffic to its Digital One Mobile application.
Fidelity National often undertakes shareholder value-boosting measures. In the first quarter, the company returned $300 million to shareholders in the form of dividends. The company aims to maintain 35% dividend payout ratio in 2023 and expects to achieve targeted annual dividend growth parallel with adjusted net earnings growth. It has a dividend yield of 3.6%, higher than the industry’s average of 0.7%.
The company does not move away from shedding non-core assets to boost efficiency and profitability. Currently, it has plans to opt for a tax-free spin-off of its Merchant Solutions business. This is expected to complete by early 2024.
FIS’s valuation seems cheaper than the industry at the current level. Looking at its 12-month forward price-to-earnings multiple, investors might want to pay a higher premium. FIS currently has a ratio of 9.3X, much lower than the industry’s average of 21.3X.
Key Concerns
There are a few factors that are impeding the stock’s growth lately.
Increasing costs are dampening its profits. Selling, general and administrative expenses witnessed a CAGR of 26% over the last five years that ended in 2022. The growing costs due to a multi-year modernization of platforms and applications are anticipated to keep its margins under pressure. Nevertheless, we believe that a systematic and strategic plan of action bodes well for the long run.
Stocks to Consider
Some better-ranked stocks in the Financial Transaction Services space are WEX Inc. (WEX - Free Report) , Visa Inc. (V - Free Report) and Paysafe Limited (PSFE - Free Report) . Each of these companies presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for WEX’s 2023 earnings indicates a 3.8% increase from the prior-year reported number. Also, the consensus mark for 2023 revenues indicates 5.8% growth. WEX’s earnings beat estimates in each of the last four quarters, the average surprise being 5.4%.
The Zacks Consensus Estimate for Visa’s 2023 earnings indicates a 14.4% increase from the prior-year reported number. Also, the consensus mark for 2023 revenues indicates 11% growth. V’s earnings beat estimates in each of the last four quarters, the average surprise being 8%.
The Zacks Consensus Estimate for Paysafe’s 2023 earnings is pegged at $2.2 per share, which witnessed one upward estimate revision over the past 60 days against none in the opposite direction. PSFE’s earnings beat estimates in three of the last four quarters and missed once, the average surprise being 190.5%.