First Data (FDC) Q1 Earnings Match Estimates, Guides Well

First Data Corporation’s (NYSE:FDC) first-quarter 2017 earnings matched the Zacks Consensus Estimate. Shares were up 3.81% at the end of Monday’s trading in response to the decent results.

There was a significant increase in earnings on a year-over-year basis driven by increased revenues, cost management and capital structure improvement initiatives.

In the quarter, First Data continued to expand its enterprise business. The company differentiates itself in this space by consistently offering new features and solutions to existing clients and making continuous efforts to expand its client base. It continues to maintain its leading position in the bank acquiring channel through strategic partnerships.

First Data continued to progress steadily with its SMB turnaround plan, which is expected to boost the company’s North American merchant business. The company has been improving on both merchant and sales force attrition.

Overall, we believe First Data’s focus on globalizing its offerings and strategic partnerships along with its healthy business around large and small banks will drive growth going forward. First Data has had an impressive run on the bourse over the last one year. The company gained 51.7%, much better than the Zacks Business Services industry’s addition of 3.8%.

Let’s check out the numbers in detail

Consolidated Revenues

Consolidated revenues that include transaction and processing fees, product sales, reimbursable debit network fees, postage and other were $2.8 billion, up 1% year over year on a reported as well as constant currency basis.

Revenues by Segment

Segmental revenues including that from Global Business Solutions, Global Financial Solutions and Network & Security Solutions came in at $1.7 billion up 2% year over year on a reported basis and 3% on a constant currency basis.

Global Business Solutions, Global Financial Solutions and Network & Security Solutions generated 56%, 23% and 21% of quarterly revenues, respectively.

Seasonality results in considerable variations in First Data’s quarterly revenues.

Global Business Solutions increased 2% year over year on a reported basis and 3% on a constant currency basis driven by strong results across North America, Europe, Middle East and Africa (EMEA) and Asia Pacific (APAC) regions.

Global Financial Solutions were up 2% year over year on a reported basis and 5% on a constant currency basis. New business and internal growth in Australia drove the improvement.

Network & Security Solutions increased 3% year over year on a reported basis as well as constant currency basis driven by strength across EFT Network and Security and Fraud solutions.

Operating Performance

Segmental earnings before interest tax depreciation and amortization (EBITDA) came in at $651 million, up 2% on a reported basis and 4%, exclusive of the impacts from currency and the Australian ATM divestiture. Segment EBITDA margin of 37.7% was up 10 basis points year over year.

Excluding amortization of acquisition related intangibles, restructuring costs and other items, but including stock-based compensation costs, First Data reported adjusted net income of $197.62 million or 21 cents per share compared with the year-ago figure of $110.6 million or 12 cents per share. The growth was mainly driven by strong operating results and lower interest expense.

First Data Corporation Price, Consensus and EPS Surprise

Balance Sheet and Cash Flow

At the end of the first quarter, cash and cash equivalents balance was $503 million compared with $385 million in the previous quarter. Long-term debt was $18.1 billion, almost flat sequentially.

The company generated $421 million in cash from operating activities and spent $117 million on capex and $43 million on distribution to minority interest and other. This resulted in free cash flow of $261 million, up 24% from $211 million in the year-ago period.

Outlook

Reiterating its earlier guidance for full-year 2017, the company continues to expect segment revenues to grow 3% to 5% and segment EBITDA to improve 5% to 7%. Similarly, adjusted EPS is still expected to grow 15% and free cash flow to stay above the $1 billion mark. Management expects the second half of the year to be stronger than the first half.

Zacks Rank and Stocks to Consider

First Data currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader technology sector include Alphabet Inc. (NASDAQ:GOOGL) , Monolithic Power Systems, Inc. (NASDAQ:MPWR) and Internap Corporation (NASDAQ:INAP) . While Alphabet sports a Zacks Rank #1 (Strong Buy), Monolithic Power and Internap carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected earnings per share growth rates for Alphabet, Internap and Monolithic Power are 16.7%, 3% and 17%, respectively.

Zacks’ Best Private Investment Ideas

While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.

Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Click here for Zacks' private trades >>