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Can Fidelity (FIS) Deliver Positive Earnings Surprise in Q2?

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Fidelity National Information Services, Inc. (FIS - Free Report) is scheduled to release second-quarter 2017 earnings on Aug 2, before the opening bell. The company’s earnings and revenues are expected to grow on a year-over-year basis.

Notably, Fidelity delivered positive earnings surprises in three of the prior four quarters, with an average beat of 2.9%.

In the last quarter, the company reported adjusted earnings per share of 86 cents, which surpassed the Zacks Consensus Estimate by 4 cents. Earnings reflected higher revenues along with lower expenses.

During the second quarter, Fidelity completed the divesture of its majority stake in Capco to Clayton, Dubilier & Rice, a private investment firm with operations in London and New York. It received cash proceeds of $469 million or $441 million, net of taxes and deal-related expenses, from the deal. Following the divesture, Fidelity holds about 40% equity interest in Capco.

Fidelity National Information Services, Inc. Price and EPS Surprise

Why a Likely Positive Surprise?

According to our proven model, Fidelity has the right combination of two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.03%. This is a major indicator of a likely positive earnings surprise.

Zacks Rank: Fidelity’s Zacks Rank #3 when combined with a positive ESP makes us reasonably confident of an earnings beat.

Factors to Influence Q2 Results

Over the years, Fidelity strengthened its dominant position in the financial and payments solutions business, primarily based on its superior product portfolio.

The company’s service revenues are likely to increase because of higher U.S. debit as well as credit card payment volumes.

Fidelity’s divesture of its majority stake in Capco is in line with its strategy to focus more on core operations of providing software, technology and processing services to the retail and institutional banking, payments, and asset and wealth management sectors. The company expects the deal to contribute 11–12 cents to adjusted earnings per share for the to-be-reported quarter.

Nevertheless, the company’s focus on introducing new and innovative products in order to meet the growing demands of customers is likely to increase expenses, as witnessed in the past.

Fidelity’s activities during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained unchanged at 97 cents, over the last seven days.

Earnings Schedule of Other Stocks

Mitsubishi UFJ Financial Group, Inc. (MTU - Free Report) is scheduled to report results on Aug 7. UBS Group AG (UBS - Free Report) and The Royal Bank of Scotland Group plc (RBS - Free Report) are scheduled to report on Aug 4.

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