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Fidelity's (FIS) Ratings Upgraded by Moody's, Outlook Stable

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Moody's Investors Service, a rating arm of Moody's Corporation (MCO - Free Report) , upgraded senior unsecured rating of Fidelity National Information Services, Inc. (FIS - Free Report) to Baa2 from Baa3.

However, the rating firm’s outlook for the company remains “stable” on expectation of mid-single digit revenue and EBITDA growth on an organic basis to be recorded by Fidelity. Further, the rating agency anticipates the company to generate steady operating cash flow of more than $2 billion, on an annual basis.

Rationale Behind the Upgrade in Ratings

The upward revision in ratings was based on Moody's expectation for Fidelity to record free cash flow more than $1 billion after dividends in 2018. Notably, the company has distributed the cash flow in a way de-levering the balance sheet from over 4x in Nov 2015 during SunGard Data Systems’ acquisition to around 3.2x as of Mar 31, 2017. Therefore, Moody’s anticipates further de-levering to the mid to high 2x range over the next 12–18 months as targeted by Fidelity.

Notably, Fidelity has curbed its share repurchase and M&A activities since the buyout of SunGard till it achieves the target. Moreover, increasing profitability of Fidelity, along with the pace of the SunGard acquisition integration, drove Moody’s to upgrade the ratings.

It’s noteworthy that the addition of SunGard to Fidelity’s portfolio was in line with the company’s long-term goals, along with being a profitable business. The acquisition of SunGard expanded Fidelity’s offerings by enabling it to cater to a much wider set of clients in banking and capital markets (by serving existing clients and also acquiring new clients). In addition, this acquisition has made the company a leading player in retail and wholesale financial technology, acting as a driving factor for Baa2 senior unsecured rating.

Fidelity currently carries a Zacks Rank #3 (Hold). Shares of this stock gained 16.0% over the last one year compared with 20.6% growth recorded by the Zacks categorized Financial Transaction Services industry.



Stocks to Consider

BOK Financial Corporation (BOKF - Free Report) has been witnessing upward estimate revisions for the last 60 days. Over the last one year, the company’s share price has been up more than 40%. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Comerica Incorporated (CMA - Free Report) has been witnessing upward estimate revisions for the last 60 days. Additionally, the stock moved up nearly 75.7% over the past one year. It currently has a Zacks Rank #2 (Buy).

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