Shares of Fiserv, Inc. (FISV - Free Report) have gained 24.6% on a year-to-date basis, outperforming the 9.4% rise of the Zacks S&P 500 Composite.
Catalysts Behind the Upside
Acquisitions Contributing to Top Line
Acquisitions of Monitise plc, Dovetail Group Limited, PCLender, LLC and Online Banking Solutions, Inc., completed in 2017 contributed $42 million of revenues in the first half of 2018. Additionally, these helped Fiserv to improve cash management and digital business banking solutions, and transform its payments infrastructure.
Last month, Fiserv inked a deal to acquire parts of U.S. Bancorp (USB) owned Elan Financial Services business. Valued at $690 million, the deal includes Elan’s debit card processing, ATM Managed Services and MoneyPass surcharge free network.
The buyout is expected to strengthen the company’s position in the debit card processing space and expand its mobile and digital payments offerings for both consumers and businesses.
Diversified Product Portfolio to Attract Customers
Fiserv looks well poised on the back of its diversified product portfolio. In second-quarter 2018, Fiserv’s DNA platform had 11 clients, which is expected to reach nearly 30 by the end of 2018. DNA reported its highest sales in the quarter since its acquisition in 2013. DNA's modern architecture and true real-time processing remained popular. Mobiliti ASP subscribers grew 24% in the quarter to 7.5 million. Zelle transactions grew more than 40% sequentially and more than 15 times year over year. Debit volume growth in the quarter was in high single digits. P2P transactions also reported solid growth.
Further, the company seems to be actively engaged in enhancing its services. In August 2018, Fiserv upgraded its unified managed account (UMA) services to help financial institutions and advisors operate more efficiently. In the same month, Fiserv announced the launch of two enhanced consumer authentication solutions, step-up authentication and identity verification to help call centers counter card fraud.
The diversified product portfolio leads to a steady flow of customers, considering the rapidly changing financial services industry and increasing demand for digital banking and payment services.
We are also impressed with Fiserv’s consistent efforts to return value to shareholders in the form of share repurchases. In the first half of 2018, Fiserv repurchased 11 million shares for $789 million. As of Jun 30, 2018, the company had 10.4 million shares available for buyback. In 2017, 2016 and 2015, Fiserv repurchased shares worth $1.17 billion, $1.20 billion and $1.47 billion, respectively. Such moves indicate the company’s commitment to create value for shareholders and underline its confidence in its business.
Zacks Rank & Stocks to Consider
Currently, Fiserv carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Business Services sector include Broadridge Financial Solutions (BR - Free Report) , Paychex (PAYX - Free Report) and Convergys , each carrying a Zacks Rank of 2 (Buy).
The long-term expected earnings per share growth rate for Broadridge Financial Solutions, Paychex and Convergys is 10%, 8.2% and 7.5%, respectively
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