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First Data Rides on Strategic Business Moves, Product Suite

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First Data Corporation (FDC - Free Report) stock has rallied 23.4% in the past six months against the industry’s loss of 0.1%.


We believe prudent business moves in the form of strategic acquisitions, partnerships and agreements led to this impressive price performance. Diversified product portfolio is another major positive.

Notably, First Data reported better-than-expected first-quarter 2018 results. Adjusted earnings of 29 cents per share surpassed the Zacks Consensus Estimate by 3 cents and increased 3.6% on a year-over-year basis. Total segment revenues came it at $2.1 billion, outpacing the consensus mark by $176 million. The figure was up 11% year over year on a reported basis, 10% on a comparable accounting basis and 5% on an organic constant-currency basis.

What’s Driving First Data?

First Data’s business segmentation allows it to strengthen its global client base and globalize its offerings. The company’s comprehensive offerings include retail point-of-sale, e-commerce services, credit solutions, next generation offerings such as mobile payment services and cloud-based point-of-sale operating system.

Acquisitions have been a key growth catalyst for First Data. In January 2018, the company completed the purchase of GreekBill, a financial management service provider for almost $17 million. In 2017, First Data completed three acquisitions - Accullink Inc. (May 2017), CardConnect Corp. (July 2017) and BluePay Holdings, Inc. (December 2017). All the three companies, which offer technology enabled payment processing solutions, were integrated in the company’s Global Business Solutions segment. These acquisitions will boost the segment’s offerings and open up more growth opportunities for First Data.

Strategic partnerships and agreements have also been playing a significant role in shaping the growth trajectory of the company. Since the beginning of this year, First Data entered into four partnerships with SBI Card (Jan 25), RBL Bank (Mar 11), Navient (May 23) and Mastercard (Jun 13). First Data is offering its innovative VisionPLUS software to SBI and RBL Bank to help them offer card processing services across India. The company is acting as the primary technology solutions provider for Navient's federal and private education loans. Alliance with Mastercard involves First Data offering its digital disbursement platform, Disburse-to-Debit solution to Mastercard’s business customers. These endeavors will expand First Data’s client base and are likely to boost top-line growth.

First Data’s Enterprise Business is also doing well. The company differentiates itself in this space by consistently offering new features and solutions to existing clients while making continuous efforts to expand its client base. The company continues to expand its enterprise business through client wins. It has healthy business around large and small banks. A strong and comprehensive product suite increases receptivity and offers good opportunities to grow organically. The company’s bank channel, both in acquiring and GFS, appears to be strong.

Notably, for 2018, First Data also raised its guidance for both the top and the bottom lines. Adjusted earnings for 2018 are expected between $1.42 per share and 1.47 per share compared with the previous guidance of $1.35-$1.40 per share. Segment revenue growth is expected between 6% and 7% compared with the previous guidance of 5-7%.

Zacks Rank & Other Stocks to Consider

Currently, First Data is a Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A few top-ranked stocks in the broader Business Services sector include Avis Budget Group, Inc. (CAR - Free Report) , Vectrus, Inc. (VEC - Free Report) and FLEETCOR Technologies, Inc (FLT - Free Report) . While Avis Budget sports a Zacks Rank #1, Vectrus and FLEETCOR carry a Zacks Rank #2.

In the trailing four quarters, Avis Budget, Vectrus and FLEETCOR delivered a positive earnings surprise of 35.4%, 25.9% and 2.9%, respectively.

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