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Fidelity National (FIS) Down 1.5% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Fidelity National Information Services (FIS - Free Report) . Shares have lost about 1.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Fidelity National due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Fidelity National Q3 Earnings Top on Banking Solutions, '24 EPS View Up
Fidelity National reported third-quarter 2024 adjusted earnings per share (EPS) of $1.40, which beat the Zacks Consensus Estimate by 8.5%. Also, the bottom line increased 48.9% year over year.
Revenues grew 3.2% year over year to $2.6 billion. Also, the top line beat the consensus mark by a whisker.
The strong third-quarter results benefited from strong recurring revenue growth in both segments and new sales momentum. It witnessed improved results from both the Banking Solutions and Capital Market Solutions units. However, higher expenses partially offset the positives.
Q3 Performance
The cost of revenues was $1.59 billion in the quarter under review, which rose 4% year over year. Selling, general and administrative expenses of Fidelity National increased 7.6% year over year to $521 million and were lower than our estimate of $539.8 million. Net interest expenses declined 60.5% year over year to $64 million and was lower than our estimate of $80.1 million.
Adjusted EBITDA from continuing operations declined 0.5% year over year to $1.1 billion but beat our model estimate of $1 billion. Adjusted EBITDA margin of 41.3% deteriorated 140 basis points (bps) year over year in the third quarter.
Segmental Update
Revenues from the Banking Solutions unit increased 3% year over year to $1.78 billion, missing the Zacks Consensus Estimate by 0.3%. Improved adjusted recurring revenues shaped the segment’s quarterly performance. Adjusted EBITDA margin of 45.2% improved 10 bps year over year, attributable to cost efficiencies and operating leverage.
The Capital Market Solutions segment recorded revenues of $730 million, which grew 8% year over year in the third quarter and beat both the Zacks Consensus Estimate and our model estimate by a whisker. The metric improved as a result of strong recurring revenue growth. Adjusted EBITDA margin increased 90 bps year over year to 49.9% thanks to operating leverage and improved high-margin license revenue.
The Corporate and Other segment’s revenues amounted to $61 million, which declined 27% year over year in the quarter under review. The reported figure beat the Zacks Consensus Estimate of $54.5 million and our estimate of $55.1 million. Adjusted EBITDA loss was $108 million in the quarter under review.
Financial Update (As of Sept. 30, 2024)
Fidelity National exited the third quarter with cash and cash equivalents of $1.3 billion, up from $440 million at 2023-end. Total assets of $34.3 billion fell from $55.1 billion at 2023-end.
Long-term debt, excluding the current portion, amounted to $10.5 billion, down from $13 billion at 2023-end. The current portion of long-term debt totaled $317 million. Short-term borrowings amounted to $112 million at the third-quarter end.
Total equity of $16.6 billion dropped from $19.1 billion at 2023-end.
Fidelity National generated net cash from operations of $1.4 billion in the first nine months of 2024, which improved 7.1% year over year. Adjusted free cash flows increased 22.7% year over year to $1.1 billion.
Share Repurchase & Dividend Update
Fidelity National rewarded $699 million to its shareholders to the tune of share buybacks worth $500 million and dividends of $199 million in the third quarter.
Management reiterated its target of $4 billion of share buybacks in 2024. Fidelity National reiterates its aim to achieve a dividend payout ratio of 35% of adjusted net earnings, excluding equity method investment earnings (loss).
4Q24 View
Management forecasts revenues between $2.612 billion and $2.642 billion. Adjusted EBITDA is projected to be in the range of $1.104-$1.119 billion. Adjusted EPS is estimated to be between $1.32 and $1.37. Adjusted EBITDA margin is projected to be in the range of 42.3-42.4%.
2024 Guidance Updated
Revenues are now expected to be within $10.14-$10.17 billion for 2024, indicating 4.1-4.4% adjusted revenue growth. The Banking Solutions and Capital Market Solutions units are estimated to record year-over-year increases of 3-3.5% and 6.5-7%, respectively.
Adjusted EBITDA is projected to be between $4.125 billion and $4.140 billion in 2024, increasing from the 2023 figure of $4 billion. Adjusted EBITDA margin is anticipated around 40.7%.
Adjusted EPS guidance is revised upward between $5.15 and $5.20, which implies a significant growth from the 2023 figure of $3.37. Net interest expenses are likely to stay within $310-$315 million for 2024.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
Currently, Fidelity National has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Fidelity National has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Fidelity National is part of the Zacks Financial Transaction Services industry. Over the past month, Global Payments (GPN - Free Report) , a stock from the same industry, has gained 10.1%. The company reported its results for the quarter ended September 2024 more than a month ago.
Global Payments reported revenues of $2.36 billion in the last reported quarter, representing a year-over-year change of +5.6%. EPS of $3.08 for the same period compares with $2.75 a year ago.
Global Payments is expected to post earnings of $2.97 per share for the current quarter, representing a year-over-year change of +12.1%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.1%.
Global Payments has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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Fidelity National (FIS) Down 1.5% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Fidelity National Information Services (FIS - Free Report) . Shares have lost about 1.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Fidelity National due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Fidelity National Q3 Earnings Top on Banking Solutions, '24 EPS View Up
Fidelity National reported third-quarter 2024 adjusted earnings per share (EPS) of $1.40, which beat the Zacks Consensus Estimate by 8.5%. Also, the bottom line increased 48.9% year over year.
Revenues grew 3.2% year over year to $2.6 billion. Also, the top line beat the consensus mark by a whisker.
The strong third-quarter results benefited from strong recurring revenue growth in both segments and new sales momentum. It witnessed improved results from both the Banking Solutions and Capital Market Solutions units. However, higher expenses partially offset the positives.
Q3 Performance
The cost of revenues was $1.59 billion in the quarter under review, which rose 4% year over year. Selling, general and administrative expenses of Fidelity National increased 7.6% year over year to $521 million and were lower than our estimate of $539.8 million. Net interest expenses declined 60.5% year over year to $64 million and was lower than our estimate of $80.1 million.
Adjusted EBITDA from continuing operations declined 0.5% year over year to $1.1 billion but beat our model estimate of $1 billion. Adjusted EBITDA margin of 41.3% deteriorated 140 basis points (bps) year over year in the third quarter.
Segmental Update
Revenues from the Banking Solutions unit increased 3% year over year to $1.78 billion, missing the Zacks Consensus Estimate by 0.3%. Improved adjusted recurring revenues shaped the segment’s quarterly performance. Adjusted EBITDA margin of 45.2% improved 10 bps year over year, attributable to cost efficiencies and operating leverage.
The Capital Market Solutions segment recorded revenues of $730 million, which grew 8% year over year in the third quarter and beat both the Zacks Consensus Estimate and our model estimate by a whisker. The metric improved as a result of strong recurring revenue growth. Adjusted EBITDA margin increased 90 bps year over year to 49.9% thanks to operating leverage and improved high-margin license revenue.
The Corporate and Other segment’s revenues amounted to $61 million, which declined 27% year over year in the quarter under review. The reported figure beat the Zacks Consensus Estimate of $54.5 million and our estimate of $55.1 million. Adjusted EBITDA loss was $108 million in the quarter under review.
Financial Update (As of Sept. 30, 2024)
Fidelity National exited the third quarter with cash and cash equivalents of $1.3 billion, up from $440 million at 2023-end. Total assets of $34.3 billion fell from $55.1 billion at 2023-end.
Long-term debt, excluding the current portion, amounted to $10.5 billion, down from $13 billion at 2023-end. The current portion of long-term debt totaled $317 million. Short-term borrowings amounted to $112 million at the third-quarter end.
Total equity of $16.6 billion dropped from $19.1 billion at 2023-end.
Fidelity National generated net cash from operations of $1.4 billion in the first nine months of 2024, which improved 7.1% year over year. Adjusted free cash flows increased 22.7% year over year to $1.1 billion.
Share Repurchase & Dividend Update
Fidelity National rewarded $699 million to its shareholders to the tune of share buybacks worth $500 million and dividends of $199 million in the third quarter.
Management reiterated its target of $4 billion of share buybacks in 2024. Fidelity National reiterates its aim to achieve a dividend payout ratio of 35% of adjusted net earnings, excluding equity method investment earnings (loss).
4Q24 View
Management forecasts revenues between $2.612 billion and $2.642 billion. Adjusted EBITDA is projected to be in the range of $1.104-$1.119 billion. Adjusted EPS is estimated to be between $1.32 and $1.37. Adjusted EBITDA margin is projected to be in the range of 42.3-42.4%.
2024 Guidance Updated
Revenues are now expected to be within $10.14-$10.17 billion for 2024, indicating 4.1-4.4% adjusted revenue growth. The Banking Solutions and Capital Market Solutions units are estimated to record year-over-year increases of 3-3.5% and 6.5-7%, respectively.
Adjusted EBITDA is projected to be between $4.125 billion and $4.140 billion in 2024, increasing from the 2023 figure of $4 billion. Adjusted EBITDA margin is anticipated around 40.7%.
Adjusted EPS guidance is revised upward between $5.15 and $5.20, which implies a significant growth from the 2023 figure of $3.37. Net interest expenses are likely to stay within $310-$315 million for 2024.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
Currently, Fidelity National has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Fidelity National has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Fidelity National is part of the Zacks Financial Transaction Services industry. Over the past month, Global Payments (GPN - Free Report) , a stock from the same industry, has gained 10.1%. The company reported its results for the quarter ended September 2024 more than a month ago.
Global Payments reported revenues of $2.36 billion in the last reported quarter, representing a year-over-year change of +5.6%. EPS of $3.08 for the same period compares with $2.75 a year ago.
Global Payments is expected to post earnings of $2.97 per share for the current quarter, representing a year-over-year change of +12.1%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.1%.
Global Payments has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.