Fiserv (FISV) Q1 Earnings And Revenues Surpass Estimates

Fiserv Inc (NASDAQ:FISV).’s (NYSE:FIS) first-quarter 2017 adjusted earnings from continuing operations of $1.25 per share beat the Zacks Consensus Estimate of $1.18 and improved 17.9% from the year-ago quarter.

Total revenue increased approximately 4.7% year over year to $1.394 billion and also beat the Zacks Consensus Estimate of $1.393 billion. Adjusted revenues grew 5.3% year over year to $1.32 billion.

Segment-wise, Payments and Industry Products adjusted revenues increased 7.3% year over year to $720 million. Financial Institution Services revenues were up 3.5% year over year to $620 million.

Internal revenues rose 4% owing to growth in Payments (up 5%) and Financial (up 4%) segments.

Source-wise, total Processing and services revenues increased 5% on a year-over-year basis to $1.18 billion while Product revenues increased 3.3% year over year to $216 million.

Margins

Adjusted operating income increased 7.5% from $399 million in the year-ago quarter to $429 million. The company’s adjusted operating margin of 32.5% increased 60 basis points (bps) on a year-over-year basis.

Other Financial Details

As of Mar 31, 2017, Fiserv had cash and cash equivalents of $308 million compared with $300 million as on Dec 31, 2016. Long-term debt at quarter-end was $4.55 billion.

Fiserv’s cash from operating activities for the quarter ended Mar 31, 2017 was $463 million compared with $509 million reported in the year-ago period. The company’s free cash flow increased to $366 million in the quarter from $298 million reported year over year.

Fiserv bought back 3.4 million shares for $389 million in the quarter.

Guidance

For 2017, Fiserv expects adjusted earnings per share in a range of $5.03–$5.17, representing growth rate of 14%–17% year over year.

Adjusted internal revenue growth is now expected to be 4%–5%.

Our Take

Fiserv commands a leading position in the financial and payment solutions business backed by a broad customer base and key contract wins. Additionally, the strong user base of Mobiliti ASP remains a major growth driver. The company remains focused on expanding its product portfolio.

Fiserv also expects revenues from base solutions like DNA, Agiliti and Now to drive growth as well as benefit from its new five-year cost cutting program. In the quarter, Fiserv added five DNA clients, four among them having over $1 billion in assets. Mobiliti ASP subscribers grew 30% to 5.8 million. The company achieved $20 million in savings against $250 million targeted over five years. It expects to achieve $60 million in savings this year.

However, lower termination fees, EMV deferral and adverse foreign currency translations are negatively impacting the company’s sales. Moreover, increasing regulations in the banking and financial services industry and intensifying competition from the likes of Equifax Inc. (NYSE:EFX) , Fidelity National Information Services, Inc. (NYSE:FIS) remain concerns.

Zacks Rank & Stock Price Movement

Fiserv carries a Zacks Rank #2 (Buy). We also note that Fiserv’s shares have gained 21.00% in the past one year, outperforming the Zacks categorized Financial Transaction Services industry, which gained 16.06%.

Other Stocks to Consider

Another stock in the broader tech space worth considering is Jabil Circuit Inc. (NYSE:JBL) , having the Zacks Rank same as that of Fiserv. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Jabil has delivered an average positive earnings surprise of 51.27% in the trailing four quarters.

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