Shares of Fiserv, Inc. (FISV - Free Report) hit a 52-week high of $116.24 on Nov 19, before closing a tad lower at $116.04.
The company’s shares have charted a solid trajectory, appreciating 57.9% year to date, ahead of the industry’s growth of 40.8%. Notably, Fiserv has witnessed a 10.6% rise in share price since it posted third-quarter 2019 results.
Let’s find out what’s supporting the rally.
The First Data Acquisition
The recent acquisition of First Data (completed in Jul 29) is one of the biggest financial mergers in a decade, and helped Fiserv emerge as one of the world’s largest payments and financial technology providers.
With integration progressing well, First Data is making significant contributions to Fiserv’s top and bottom-line performance. It contributed $1.6 billion to revenues and $396 million to operating income in the third quarter of 2019.
This helped Fiserv to achieve robust internal revenue and free cash flow growth, and operating margin expansion in the quarter. Internal revenue growth was 6%, led by a 10% rise in the GBS merchant business. Adjusted operating margin improved 130 basis points (bps) to 29.8% and free cash flow was more than $800 million.
Fiserv, Inc. Revenue (TTM)
Fiserv’s strong financial performance in the third quarter of 2019 allowed it to raise its guidance for 2019. Adjusted earnings per share is currently expected in the range of $3.98 to $4.02 (indicating 16-17% year-over-year growth) compared with the prior guided range of $3.39-$3.52 (suggesting 10-14% year-over-year growth).
The company now expects internal revenue growth of 6% compared with the prior guided range of 4.5-5%. Adjusted operating margin is now anticipated to expand 100 bps compared with the prior guidance of 50 bps and free cash flow conversion is estimated around 115% compared with the prior guidance of 105%.
Zacks Rank & Other Stocks to Consider
Currently, Fiserv carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader Zacks Business Services sector are Global Payments (GPN - Free Report) , Mastercard (MA - Free Report) and Cardtronics (CATM - Free Report) . While Global Payments sports a Zacks Rank #1 (Strong Buy), Mastercard and Cardtronics carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term expected EPS (three to five years) growth rates for Global Payments, Mastercard and Cardtronics are 17%, 15.9% and 4%, respectively.
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