Fidelity National Information Services, Inc. (FIS Quick QuoteFIS - Free Report) reported third-quarter 2024 adjusted earnings per share (EPS) of $1.40, which beat the Zacks Consensus Estimate by 8.5%. Also, the bottom line increased 48.9% year over year.

Revenues grew 3.2% year over year to $2.6 billion. Also, the top line beat the consensus mark by a whisker.

The strong third-quarter results benefited from strong recurring revenue growth in both segments and new sales momentum. It witnessed improved results from both the Banking Solutions and Capital Market Solutions units. However, higher expenses partially offset the positives.

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Fidelity National Information Services, Inc. Price, Consensus and EPS Surprise

Fidelity National Information Services, Inc. price-consensus-eps-surprise-chart | Fidelity National Information Services, Inc. Quote

Q3 Performance

The cost of revenues was $1.59 billion in the quarter under review, which rose 4% year over year. Selling, general and administrative expenses of Fidelity National increased 7.6% year over year to $521 million and were lower than our estimate of $539.8 million. Net interest expenses declined 60.5% year over year to $64 million and was lower than our estimate of $80.1 million.

Adjusted EBITDA from continuing operations declined 0.5% year over year to $1.1 billion but beat our model estimate of $1 billion. Adjusted EBITDA margin of 41.3% deteriorated 140 basis points (bps) year over year in the third quarter.

Segmental Update

Revenues from the Banking Solutions unit increased 3% year over year to $1.78 billion, missing the Zacks Consensus Estimate by 0.3%. Improved adjusted recurring revenues shaped the segment’s quarterly performance. Adjusted EBITDA margin of 45.2% improved 10 bps year over year, attributable to cost efficiencies and operating leverage.

The Capital Market Solutions segment recorded revenues of $730 million, which grew 8% year over year in the third quarter and beat both the Zacks Consensus Estimate and our model estimate by a whisker. The metric improved as a result of strong recurring revenue growth. Adjusted EBITDA margin increased 90 bps year over year to 49.9% thanks to operating leverage and improved high-margin license revenue.

The Corporate and Other segment’s revenues amounted to $61 million, which declined 27% year over year in the quarter under review. The reported figure beat the Zacks Consensus Estimate of $54.5 million and our estimate of $55.1 million. Adjusted EBITDA loss was $108 million in the quarter under review.

Financial Update (As of Sept. 30, 2024)

Fidelity National exited the third quarter with cash and cash equivalents of $1.3 billion, up from $440 million at 2023-end. Total assets of $34.3 billion fell from $55.1 billion at 2023-end.

Long-term debt, excluding the current portion, amounted to $10.5 billion, down from $13 billion at 2023-end. The current portion of long-term debt totaled $317 million. Short-term borrowings amounted to $112 million at the third-quarter end.

Total equity of $16.6 billion dropped from $19.1 billion at 2023-end.

Fidelity National generated net cash from operations of $1.4 billion in the first nine months of 2024, which improved 7.1% year over year. Adjusted free cash flows increased 22.7% year over year to $1.1 billion.

Share Repurchase & Dividend Update

Fidelity National rewarded $699 million to its shareholders to the tune of share buybacks worth $500 million and dividends of $199 million in the third quarter.

Management reiterated its target of $4 billion of share buybacks in 2024. Fidelity National reiterates its aim to achieve a dividend payout ratio of 35% of adjusted net earnings, excluding equity method investment earnings (loss).

4Q24 View

Management forecasts revenues between $2.612 billion and $2.642 billion. Adjusted EBITDA is projected to be in the range of $1.104-$1.119 billion. Adjusted EPS is estimated to be between $1.32 and $1.37. Adjusted EBITDA margin is projected to be in the range of 42.3-42.4%.

2024 Guidance Updated

Revenues are now expected to be within $10.14-$10.17 billion for 2024, indicating 4.1-4.4% adjusted revenue growth. The Banking Solutions and Capital Market Solutions units are estimated to record year-over-year increases of 3-3.5% and 6.5-7%, respectively.  

Adjusted EBITDA is projected to be between $4.125 billion and $4.140 billion in 2024, increasing from the 2023 figure of $4 billion. Adjusted EBITDA margin is anticipated around 40.7%.

Adjusted EPS guidance is revised upward between $5.15 and $5.20, which implies a significant growth from the 2023 figure of $3.37. Net interest expenses are likely to stay within $310-$315 million for 2024.

Zacks Rank

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

Other Business Services Sector Releases

Of the other Business Services sector industry players that have reported September-quarter results so far, the bottom-line results of Visa Inc. (V Quick QuoteV - Free Report) , The Western Union Company (WU Quick QuoteWU - Free Report) and Trane Technologies plc (TT Quick QuoteTT - Free Report) beat the Zacks Consensus Estimate.

Visa reported fourth-quarter fiscal 2024 earnings of $2.71 per share, which outpaced the Zacks Consensus Estimate of $2.58 by 5%. The bottom line increased 16% year over year. Net revenues of $9.6 billion improved 12% year over year. The top line beat the consensus mark by 1.2%. Visa's payments volume increased 8% year over year on a constant-dollar basis. Processed transactions (implying transactions processed by Visa) grew 10% year over year to 61.5 billion. On a constant-dollar basis, the cross-border volume rose 13% year over year. 

Service revenues (depending on payments volume in the previous quarter) advanced 8% year over year to $4.2 billion in the September quarter. Data processing revenues of $4.61 billion grew 8% year over year. International transaction revenues advanced 9% year over year to $3.47 billion. Client incentives (a contra-revenue item) increased 6% year over year to $3.6 billion 

Western Union reported third-quarter 2024 adjusted EPS of 46 cents, which surpassed the Zacks Consensus Estimate by 4.6%. The bottom line advanced 7% year over year. However, total revenues declined 6% on a reported basis to $1.04 billion. Additionally, the top line beat the Zacks Consensus Estimate by 0.4%. Adjusted operating margin was 19.1%, which deteriorated 50 basis points (bps) year over year. 

Operating income fell 22% year over year to $164.9 million, which fell short of our estimate of $201.7 million. The Consumer Money Transfer (CMT) segment recorded revenues of $932.2 million, which tumbled 9% on a reported basis and 8% on an adjusted basis. Transactions within the CMT segment grew 3% year over year. The Consumer Services segment’s revenues climbed 32% on a reported basis and 15% on an adjusted basis to $103.8 million. 

Trane Technologies reported third-quarter 2024 adjusted EPS of $3.37, which surpassed the Zacks Consensus Estimate by 4.3% and increased 20.8% year over year. Revenues of $5.4 billion beat the consensus mark by 2.4% and increased 11% year over year on a reported basis and organically. Bookings were up 5% year over year on a reported basis and organically. The Americas segment’s revenues of $4.5 billion were higher than our estimate of $4 billion and increased 15% year over year on a reported basis and organically. Bookings of $4.3 billion were up 8% on a reported basis and organically.

Europe, Middle East and Africa segment’s revenues were $667.8 million, up 8% year over year on a reported basis and organically. Bookings of $637 million were up 9% year over year on a reported basis and organically. Revenues from the Asia Pacific segment were down 21% year over year on a reported basis and organically to $298.5 million. Adjusted operating income was $56.9 billion, down 31% year over year. Adjusted operating margin declined 290 basis points to 19.1%.