What's in the Cards for Fiserv (FISV) This Earnings Season?

Fiserv Inc. FISV is set to report third-quarter 2017 results on Oct 31.

Last quarter, earnings of $1.19 per share missed the Zacks Consensus Estimate of $1.23. However, it improved 10.2% from the year-ago quarter. Notably, the company has beaten the Zack Consensus Estimate in three of the trailing four quarters, delivering an average positive surprise of 0.89%.

Total revenue increased approximately 1.7% year over year to $1.39 billion but missed the Zacks Consensus Estimate of $1.42 billion.

Notably, shares of Fiserv have gained 20.7% year to date, significantly underperforming the industry’s 31.8% rally.

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

Key Factors

Fiserv holds a dominant position in the financial and payment solutions business backed by a broad customer base and key contract wins. We believe product-oriented acquisitions will drive growth for the company.

Reportedly, in the third quarter, Fiserv completed the acquisitions of Monitise, PCLender and Dovetail Group.

Moreover, Fiserv’s focus on expanding its product portfolio is also a positive. We believe the company’s launch of products like Prologue Credit Loss Manager, Instant Issue Advantage and Integrator Advance in the September quarter to have led to a steady flow of customers.

Further, Fiserv’s digital banking solutions are gaining momentum among the financial institutions. The company announced in August that its Statement Advantage solution has been selected by about 600 banks and credit unions.

However, we note that 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. EFX and Fidelity National Information Services Inc. FIS remain concerns. Given the attractive prospects in the financial services market, there are always new entrants who seek to leverage on shifts in technology or product innovation to attract customers.

Fiserv’s policy of acquiring a large number of companies results in some integration risk. The company’s highly leveraged balance sheet will continue to weigh on its profitability.

Fiserv, Inc. Price and EPS Surprise

Fiserv, Inc. Price and EPS Surprise | Fiserv, Inc. Quote

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Fiserv has an Earnings ESP of +0.44% and a Zacks Rank #4 (Sell). Therefore, our proven model does not conclusively show that the company is likely to deliver a positive surprise this quarter.

A Key Stock to Consider

Here is a company that you may also want to consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming release:

Kemet Corporation KEM with an Earnings ESP of +7.46% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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