Earnings Preview: Fidelity - Analyst Blog
10 Febbraio 2012 - 1:45PM
Zacks
Fidelity National
Information Services Inc. (FIS) is all
set to announce its fourth quarter and full-year 2011 results on
February 13, 2012, after the market closes. Fidelity reported a
sedate third quarter, beating the Zacks Consensus Estimate by a
penny.
Third Quarter
Recap
In the third quarter of 2011,
Fidelity earned 62 cents per share, an increase of 19.2% from the
year-ago quarter, primarily driven by a 10.8% year-over-year growth
in revenues to $1.43 billion. Revenues rose 4.1% organically on the
back of strong results from Financial Solutions and International
Solutions.
Although Fidelity did not provide
any quarterly guidance, the company expects full year earnings in
the range of $2.24 to $2.30 per share. This implies that the
company has to earn 62 cents to 68 cents per share to meet its
current quarter guidance. Fidelity expects revenues to grow 10.0%
year over year for fiscal 2011. For further details please see
Fidelity Beats Marginally.
Estimate Revision
Trend
The Zacks Consensus Estimate for
the fourth quarter is currently pegged at 65 cents, up 1.6% from 64
cents in the year-ago quarter. This is based on an estimated
year-over-year revenue growth of 6.7% to $1.49 billion.
In the last 30 days, only one out
the 14 analysts covering the stock lowered the estimate for the
fourth quarter. However, the revision did not trigger any movement
in estimates, which stood at 65 cents over the last 30 days.
We note that Fidelity has posted an
average earnings surprise of 3.39% in the trailing four quarters,
implying that it has outdone the Zacks Consensus Estimate by the
same magnitude for the last four quarters. We don’t expect a major
change in the earnings trend for the current quarter.
Our
Recommendation
We believe that Fidelity remains a
dominant name in the financial services market, primarily due to
its expanding client base, particularly in the banking sector.
Enhanced operating efficiency has been the primary reason for
Fidelity’s ever-growing banking clientele. Currently, increasing
consolidation, tightened regulations, lower interest rates and the
liquidity crunch have forced U.S. banks, particularly the small
ones to look for ways to differentiate their services in a cost
effective way. Fidelity’s low-cost platform has emerged as a savior
for these institutions in recent times.
However, the recently announced
merger of London-based banking software maker Misys Plc
(MSY) and Swiss financial services
provider Temenos Group AG (TEMN)
is expected to provide significant competition to Fidelity in the
banking sector going forward. The proposed merger will create the
world’s largest risk-management software provider with a clientele
of approximately 1000 banks.
We also believe that sluggish
growth in the payment solutions business and a difficult
macroeconomic environment in Europe will continue to hurt
Fidelity’s profitability going forward. Moreover, the ongoing legal
battle between Fidelity and its closest rival Fiserv Inc.
(FISV) will remain an overhang in the
near term.
We, therefore, maintain our Neutral
recommendation over the long term (6-8 months). We note that
Fidelity has outperformed the broader S&P 500 market by 15.9%
over the last three months. However, the near-term concerns compel
us to maintain our cautious approach. Currently, Fidelity has a
Zacks #4 Rank, which implies a Sell rating in the short term (1-3
months).
FIDELITY NAT IN (FIS): Free Stock Analysis Report
FISERV INC (FISV): Free Stock Analysis Report
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