What To Expect From First Data (FDC) This Earnings Season?

First Data Corporation (NYSE:FDC) , a leading provider of electronic commerce solutions, is set to report first-quarter 2017 results on May 8 before the bell.

Last quarter, the company posted a positive surprise of 13.33%. In fact, First Data’s track record has been quite impressive, with the company comfortably beating estimates in all of the trailing four quarters, at an average of 14.41%.

Year to date, the stock has outperformed the Zacks Business - Services industry. It has gained 11.4% against the industry’s loss of 4%.

Let’s see how things are shaping up for this announcement.

What Our Model Indicates

Per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat earnings.

In the first quarter, we don’t expect First Data to post a surprise. This is because the company’s Earnings ESP of -4.46% complicates our surprise prediction in spite of its favorable Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

We don’t recommend Zacks Rank #4 or 5 (Strong Sell) stocks going into the earnings announcement especially when the company is seeing negative estimate revisions.

First Data Corporation Price and EPS Surprise

Seasonality

First Data’s all three business segments experience seasonality. These experience stronger demand in the fourth quarter and weaker demand in the first quarter, relative to second and third quarters. Seasonality causes considerable fluctuations in revenues and profits and makes forecasting difficult.

No Cash Dividends

First Data currently does not have any plan to pay cash dividends on its common stock. In fact, the company did not declare dividends since its Initial Public Offering (IPO). A largely subsidiary-based operation restricts the company’s ability to pay cash dividends, which depends on cash dividends received from operating subsidiaries.

SMB turnaround

First Data has made steady progress 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.

Partnerships

Strategic partnerships are the most important part of First Data’s growth program. First Data continues to maintain its leading position in bank acquiring channel through strategic partnerships. The company is making good progress with its partnerships with Ford Motor Company (NYSE:F) and Wal-Mart (NYSE:WMT). With growth initiatives going as planned, the company’s balance sheet, margins and cash generation capacity are likely to improve. Continued focus on innovation and strategic investments are expected to drive growth.

Enterprise business

The company differentiates itself in this space by consistently offering new features and solutions to existing clients while making continuous efforts to expand its client base. The company has been executing multiple enterprise wins across government, corporate and financial institutions.

Summing Up

First Data is currently riding high on strategic partnerships along with a healthy business around large and small banks. However, seasonality has a high chance of affecting the company’s results in the first quarter.

Stocks to Consider

Here are some companies which, as per our model, have the right combination of elements to post an earnings beat this quarter:

EGain Corp. (NASDAQ:EGAN) , with an Earnings ESP of +50.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Priceline Group Inc. (NASDAQ:PCLN) , with an Earnings ESP of +2.28% and a Zacks Rank #3.

The RMR Group Inc. (NASDAQ:RMR) , with an Earnings ESP of +2.27% and a Zacks Rank #3.

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