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Fidelity National (FIS) Q2 Earnings Beat, Revenues Miss
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Fidelity National Information Services Inc.’s (FIS - Free Report) second quarter 2016 adjusted earnings per share from continuing operations came in at 90 cents, beating the Zacks Consensus Estimate of 86 cents. However, revenues of $2.305 billion missed the consensus mark of $2.321 billion. On a year-over-year basis, earnings and revenues registered growth of 21.6% and 45.3% respectively. The company also raised its 2016 guidance for earnings and organic revenue growth.
Segment wise, Integrated Financial Solutions revenues grew 24.8% year over year to $1.162 billion. Revenues from Global Financial Solutions increased 88.6% year over year to $1.048 billion.
Adjusted EBITDA grew 12.7% year over year to $696 million while EBITDA margin was 29.4%.
Balance Sheet & Cash Flow
Fidelity’s balance sheet remained highly leveraged at the end of the reported quarter. As of Jun 30, 2016, cash and cash equivalents were $765 million and debt outstanding was over $11.1 billion.
In the first half of the year, net cash provided by operations was $820 million and adjusted cash flow from operations was $922 million. The company’s capital expenditures were $293 million and free cash flow was $629 million.
Fidelity National paid dividends worth $86 million in the quarter.
Guidance
The company raised its guidance for 2016 revenues and earnings.
Fidelity projects organic revenue growth in a range of 4% to 5% compared with 3% to 4% projected earlier. Adjusted earnings per share are expected to be in a range of $3.75 to $3.85 compared with $3.70 to $3.80 expected earlier.
Fidelity has strengthened its dominant position in the financial and payments solutions business, primarily based on its superior product portfolio.
Also, Fidelity is well positioned to benefit from increasing investment in mobile banking and innovative products such as PayNet. Mobile banking is developing into an essential extension of online banking as smartphone and tablet usage continues to accelerate globally. We believe that banks and financial institutions will choose the company’s innovative solutions (such as mobile wallet) in order to differentiate their services going forward. This will provide a significant growth opportunity over the long term.
Also, accretive acquisitions have played an important role. In Nov 2015, the company acquired prominent financial software and technology services provider, SunGard for approximately $9.1 billion.
Increasing consolidation in the banking sector, challenging environment for the Payments Solutions business and uncertain regulatory environment are the primary headwinds, in our view. Also, intensifying competition from the likes of Fiserv , Global Payments Inc. (GPN - Free Report) and Alliance Data Systems Corp. remain a concern.
Currently, Fidelity has a Zacks Rank #4 (Sell).
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Fidelity National (FIS) Q2 Earnings Beat, Revenues Miss
Fidelity National Information Services Inc.’s (FIS - Free Report) second quarter 2016 adjusted earnings per share from continuing operations came in at 90 cents, beating the Zacks Consensus Estimate of 86 cents. However, revenues of $2.305 billion missed the consensus mark of $2.321 billion. On a year-over-year basis, earnings and revenues registered growth of 21.6% and 45.3% respectively. The company also raised its 2016 guidance for earnings and organic revenue growth.
Quarter Highlights
Organic revenue growth was 5.4% in the quarter.
Segment wise, Integrated Financial Solutions revenues grew 24.8% year over year to $1.162 billion. Revenues from Global Financial Solutions increased 88.6% year over year to $1.048 billion.
Adjusted EBITDA grew 12.7% year over year to $696 million while EBITDA margin was 29.4%.
Balance Sheet & Cash Flow
Fidelity’s balance sheet remained highly leveraged at the end of the reported quarter. As of Jun 30, 2016, cash and cash equivalents were $765 million and debt outstanding was over $11.1 billion.
In the first half of the year, net cash provided by operations was $820 million and adjusted cash flow from operations was $922 million. The company’s capital expenditures were $293 million and free cash flow was $629 million.
Fidelity National paid dividends worth $86 million in the quarter.
Guidance
The company raised its guidance for 2016 revenues and earnings.
Fidelity projects organic revenue growth in a range of 4% to 5% compared with 3% to 4% projected earlier. Adjusted earnings per share are expected to be in a range of $3.75 to $3.85 compared with $3.70 to $3.80 expected earlier.
FIDELITY NAT IN Price, Consensus and EPS Surprise
FIDELITY NAT IN Price, Consensus and EPS Surprise | FIDELITY NAT IN Quote
Our Take
Fidelity has strengthened its dominant position in the financial and payments solutions business, primarily based on its superior product portfolio.
Also, Fidelity is well positioned to benefit from increasing investment in mobile banking and innovative products such as PayNet. Mobile banking is developing into an essential extension of online banking as smartphone and tablet usage continues to accelerate globally. We believe that banks and financial institutions will choose the company’s innovative solutions (such as mobile wallet) in order to differentiate their services going forward. This will provide a significant growth opportunity over the long term.
Also, accretive acquisitions have played an important role. In Nov 2015, the company acquired prominent financial software and technology services provider, SunGard for approximately $9.1 billion.
Increasing consolidation in the banking sector, challenging environment for the Payments Solutions business and uncertain regulatory environment are the primary headwinds, in our view. Also, intensifying competition from the likes of Fiserv , Global Payments Inc. (GPN - Free Report) and Alliance Data Systems Corp. remain a concern.
Currently, Fidelity has a Zacks Rank #4 (Sell).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>