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Fidelity National (FIS) Up 3.3% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Fidelity National Information Services (FIS - Free Report) . Shares have added about 3.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Fidelity National 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 catalysts.

Fidelity National Tops Q1 Earnings & Revenue Estimates

Fidelity’s first-quarter 2019 adjusted earnings per share from continuing operations came in at $1.64, surpassing the Zacks Consensus Estimate of $1.57. Also, the bottom line improved 9.3% from the year-ago quarter figure of $1.50.

Organic revenue growth and expanding margin were the key tailwinds. However, huge outstanding debt posed a headwind. Also, poor performance of Global Financial Solutions segment was a key concern.

On a GAAP basis, the company reported net earnings attributable to common stockholders of $148 million or 45 cents in the quarter compared with $182 million or 54 cents in the prior-year quarter. In first-quarter 2018, the company’s results were impacted by dissolution of the Brazilian joint venture.

Organic Revenues Increase, Expenses Up

GAAP revenues for the quarter came in at $2.06 billion, which decreased slightly year over year. However, the figure surpassed the consensus estimate of $2.01 billion.

Organic revenue growth was nearly 5% in the quarter.

Selling, general and administrative expenses were $361 million, up nearly 1% year over year.

Segment wise, Integrated Financial Solutions’ GAAP revenues grew 6.4% to $1.13 billion while revenues from Global Financial Solutions declined 6.9% to $863 million. Corporate/Other revenues decreased 17.3% to $65 million.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) rose nearly 3.4% year over year to $729 million while adjusted EBITDA margin expanded 130 basis points (bps) to 35.4%.

Balance Sheet & Cash Flow

As of Mar 31, 2019, cash and cash equivalents were $576 million compared with $703 million as of Dec 31, 2018. Debt outstanding was nearly $9.22 billion.

In the first quarter, net cash provided by operations was $294 million and free cash flow was $249 million.

Capital Deployment Update

Fidelity paid dividends worth $113 million in the quarter and repurchased 3.9 million shares at a total cost of about $400 million. As of Mar 31, 2019, the company had about $2.28 billion share repurchase authorization remaining.

Guidance for 2019

Fidelity expects organic revenue growth to be between 4% and 4.5% while GAAP revenues are expected to remain flat or increase 0.5%.

Adjusted earnings per share are expected to be in the band of $7.35-$7.55.

Adjusted EBITDA margin is expected to expand in the range of 150-200 bps.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Fidelity National has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was 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.

Outlook

Fidelity National has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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