Fidelity (FIS) Q4 Earnings Beat Estimates, Revenues Decline

Fidelity National Information Services’ (NYSE:FIS) fourth-quarter 2017 adjusted earnings per share from continuing operations came in at $1.36, surpassing the Zacks Consensus Estimate of $1.34. Also, earnings improved 19.3% from the year-ago quarter figure of $1.14.

Results reflect lower expenses and expanding margin. However, decline in revenues was a headwind.

After considering the net tax benefit from tax legislation of $781 million or $2.32 per share and other adjustments, the company reported net earnings of $988 million or $2.93 in the quarter compared with $207 million or 63 cents in the prior-year quarter.

For full-year 2017, the company reported net earnings attributable to common shareholders of $1.32 billion or $3.93 per share that compares favorably with $568 million or $1.72 per share in the prior year.

Revenues and Expenses Decline

For 2017, the company reported GAAP revenues of $9.12 billion, down 1.3% on a year-over-year basis. Also, the reported figure lagged the Zacks Consensus Estimate of $9.18 billion.

GAAP revenues for the quarter came in at $2.33 billion, which declined 4.7% year over year and lagged the Zacks Consensus Estimate of $2.37 billion.

Organic revenue growth was 3.1% in the quarter.

Selling, general and administrative expenses came in at $340 million, down 26.1% year over year.

Segment wise, Integrated Financial Solutions’ GAAP revenues grew 4.6% year over year to $1.2 billion while revenues from Global Financial Solutions declined 8.5% to $1.05 billion. Corporate/Other revenues decreased 46.5% to $83 million.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) rose nearly 4.1% year over year to $881 million while adjusted EBITDA margin expanded 340 basis points to 37.8%.

Balance Sheet & Cash Flow

As of Dec 31, 2017, cash and cash equivalents were $665 million compared with $683 million as of Dec 31, 2016. Debt outstanding was nearly $8.8 billion.

In the quarter, net cash provided by operations was $662 million and free cash flow was $551 million.

Fidelity paid dividends worth $96 million in the quarter and $385 million in 2017.

Guidance for 2018

Fidelity expects organic revenue growth to be in the range of 2.5-3.5% while GAAP revenue growth is expected to decline 1.5-2.5%.

Adjusted earnings per share are expected to be in the band of $5.10-$5.30.

Adjusted EBITDA margin is expected in the range of 36-37%.

Our Take

Fidelity enjoys a dominant position in financial and payments solutions business, backed by its robust product portfolio. We believe that the company is well positioned to benefit from increasing investment in mobile banking. However, increasing consolidation in the banking sector, challenging environment for the Payments Solutions business and an uncertain regulatory environment are the primary headwinds.

Fidelity National Information Services, Inc. Price, Consensus and EPS Surprise

Fidelity has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Stocks

Mastercard (NYSE:MA) reported fourth-quarter 2017 earnings per share of $1.14, beating the Zacks Consensus Estimate of $1.12. Also, the bottom line grew 33% year over year. Results primarily benefitted from higher switched transactions, increase in cross-border volume and gross dollar volume as well as gains from acquisitions.

Alliance Data Systems Corporation’s (NYSE:ADS) operating earnings of $5.24 per share in the fourth quarter of 2017 surpassed the Zacks Consensus Estimate of $5.00. The bottom line improved 12.2% year over year. Card Service and LoyaltyOne segment posted solid results. Expenses declined owing to lower operating costs fueling operating income growth.

Riding on higher revenues, Visa (NYSE:V) reported first-quarter fiscal 2018 (ended Dec 31, 2017) earnings of $1.08 per share, beating the Zacks Consensus Estimate by 10.2%. Also, the bottom line improved 25.6% year over year. Results were driven by continued growth in payments volume, cross-border volume and processed transactions.

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