It has been about a month since the last earnings report for Fiserv, Inc. . Shares were flat in that time frame.
Will the recent trend continue leading up to its next earnings release, or is FISV due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
Fiserv’s first-quarter 2018 adjusted earnings came in at 76 cents per share compared with 62 cents in the year-earlier quarter. Earnings beat the Zacks Consensus Estimate by 3 cents.
Total first-quarter 2018 revenues of $1,440 million missed the Zacks Consensus Estimate of $1,442.1 million. However, the figure increased 3.3% year over year.
Revenues in Detail
Internal revenues grew 3% in the reported quarter, with 5% growth in the Payments segment and 1% growth in the Financial segment. Payments and Industry Products segment adjusted revenues increased 6.9% year over year to $770 million. Segment revenues grew on the back of strong performance of card services and electronic payments business. Financial Institution Services segment revenues decreased 0.6% year over year to $616 million. Segment revenues declined due to divestiture of the Australian item processing business and its Lending business. Total processing and services revenues increased 5.1% on a year-over-year basis to $1,238 million while product revenues declined 6.5% year over year to $202 million.
Operating Results
Operating income for first-quarter 2018 was $608 million compared with $365 million in the year-ago quarter. Operating margin was 42.2% compared with 26.2% in the year-ago quarter. Operating income for Payments and Industry Products was $271 million compared with $259 million in the year-ago quarter. Operating margin was 32.2% compared with 32.7% in the year-ago quarter. Operating income for Financial Institution Services was $202 million compared with $196 million in the year-ago quarter. Operating margin was 32.8% compared with 31.6% in the year-ago quarter. Operating expenses declined to $832 million from $1,029 million in the year-ago quarter.
Balance Sheet and Cash Flow
Fiserv exited first-quarter 2018 with cash and cash equivalents of $382 million compared with $308 million in the year-ago quarter. As of Mar 31, 2018, long-term debt was $4,603 million compared with $4,897 million at the end of 2017. The company generated $372 million of cash from operating activities in the reported quarter compared with $463 million in the year-ago quarter. Free cash flow was $316 million in the reported quarter compared with $366 million in the year-ago quarter. During the reported quarter, Fiserv repurchased 5.7 million shares at an aggregate cost of $398 million. As of Mar 31, 2018, the company had 15.8 million shares available for buyback under its share repurchase authorization.
Expanding Clientele
Fiserv’s DNA platform signed seven new clients in the quarter. Mobiliti ASP subscribers grew 7% sequentially and 25% year over year to 7.2 million. The Mobiliti business expanded more than 50%. Zelle looked strong on the back of new clients and deals in first-quarter 2018. With Navy Federal onboard, three of the five largest credit unions in the country have been signed as full Zelle clients. Further, Zelle transactions grew more than 80% sequentially in the quarter. With this bullish backdrop, the company is optimistic about Zelle’s prospects. Debit transaction growth in the quarter was in mid single digits and P2P transactions grew more than 20% year over year.
Business Sale & Stock Split
In first-quarter 2018, Fiserv sold its 55% stake in Lending Solutions business to funds affiliated with Warburg Pincus LLC. Fiserv received total sale proceeds of $419 million from the deal. The company will retain the remaining 45% stake in the Lending Solutions business. On Mar 19, 2018, the company completed a two-for-one stock split. In January 2018, Fiserv completed the sale of the retail voucher business for $50 million.
2018 Outlook
Fiserv reaffirmed its guidance for internal revenue growth, tax rate and free cash flow conversion for 2018. Internal revenue growth is projected to be 4.5% for 2018. Adjusted effective tax rate is expected to be between 22% and 23% for 2018. Free cash flow conversion is projected to be within a range of 106% to 111% for the full year.
Additionally, the company anticipates adjusted operating margin to expand between 10 basis points and 30 basis points for the full year. Further, Fiserv expects adjusted earnings between $3.02 and $3.15 per share with growth of 22% to 27% from 2017.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been four revisions higher for the current quarter compared to six lower.
VGM Scores
At this time, FISV has a subpar Growth Score of D, a grade with the same score on the momentum front. The stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions looks promising. Notably, FISV has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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How has Fiserv (FISV) Performed a Month Post Earnings?
It has been about a month since the last earnings report for Fiserv, Inc. . Shares were flat in that time frame.
Will the recent trend continue leading up to its next earnings release, or is FISV due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
Fiserv’s first-quarter 2018 adjusted earnings came in at 76 cents per share compared with 62 cents in the year-earlier quarter. Earnings beat the Zacks Consensus Estimate by 3 cents.
Total first-quarter 2018 revenues of $1,440 million missed the Zacks Consensus Estimate of $1,442.1 million. However, the figure increased 3.3% year over year.
Revenues in Detail
Internal revenues grew 3% in the reported quarter, with 5% growth in the Payments segment and 1% growth in the Financial segment. Payments and Industry Products segment adjusted revenues increased 6.9% year over year to $770 million. Segment revenues grew on the back of strong performance of card services and electronic payments business. Financial Institution Services segment revenues decreased 0.6% year over year to $616 million. Segment revenues declined due to divestiture of the Australian item processing business and its Lending business. Total processing and services revenues increased 5.1% on a year-over-year basis to $1,238 million while product revenues declined 6.5% year over year to $202 million.
Operating Results
Operating income for first-quarter 2018 was $608 million compared with $365 million in the year-ago quarter. Operating margin was 42.2% compared with 26.2% in the year-ago quarter. Operating income for Payments and Industry Products was $271 million compared with $259 million in the year-ago quarter. Operating margin was 32.2% compared with 32.7% in the year-ago quarter. Operating income for Financial Institution Services was $202 million compared with $196 million in the year-ago quarter. Operating margin was 32.8% compared with 31.6% in the year-ago quarter. Operating expenses declined to $832 million from $1,029 million in the year-ago quarter.
Balance Sheet and Cash Flow
Fiserv exited first-quarter 2018 with cash and cash equivalents of $382 million compared with $308 million in the year-ago quarter. As of Mar 31, 2018, long-term debt was $4,603 million compared with $4,897 million at the end of 2017. The company generated $372 million of cash from operating activities in the reported quarter compared with $463 million in the year-ago quarter. Free cash flow was $316 million in the reported quarter compared with $366 million in the year-ago quarter. During the reported quarter, Fiserv repurchased 5.7 million shares at an aggregate cost of $398 million. As of Mar 31, 2018, the company had 15.8 million shares available for buyback under its share repurchase authorization.
Expanding Clientele
Fiserv’s DNA platform signed seven new clients in the quarter. Mobiliti ASP subscribers grew 7% sequentially and 25% year over year to 7.2 million. The Mobiliti business expanded more than 50%. Zelle looked strong on the back of new clients and deals in first-quarter 2018. With Navy Federal onboard, three of the five largest credit unions in the country have been signed as full Zelle clients. Further, Zelle transactions grew more than 80% sequentially in the quarter. With this bullish backdrop, the company is optimistic about Zelle’s prospects. Debit transaction growth in the quarter was in mid single digits and P2P transactions grew more than 20% year over year.
Business Sale & Stock Split
In first-quarter 2018, Fiserv sold its 55% stake in Lending Solutions business to funds affiliated with Warburg Pincus LLC. Fiserv received total sale proceeds of $419 million from the deal. The company will retain the remaining 45% stake in the Lending Solutions business. On Mar 19, 2018, the company completed a two-for-one stock split. In January 2018, Fiserv completed the sale of the retail voucher business for $50 million.
2018 Outlook
Fiserv reaffirmed its guidance for internal revenue growth, tax rate and free cash flow conversion for 2018. Internal revenue growth is projected to be 4.5% for 2018. Adjusted effective tax rate is expected to be between 22% and 23% for 2018. Free cash flow conversion is projected to be within a range of 106% to 111% for the full year.
Additionally, the company anticipates adjusted operating margin to expand between 10 basis points and 30 basis points for the full year. Further, Fiserv expects adjusted earnings between $3.02 and $3.15 per share with growth of 22% to 27% from 2017.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been four revisions higher for the current quarter compared to six lower.
Fiserv, Inc. Price and Consensus
Fiserv, Inc. Price and Consensus | Fiserv, Inc. Quote
VGM Scores
At this time, FISV has a subpar Growth Score of D, a grade with the same score on the momentum front. The stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions looks promising. Notably, FISV has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.