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Fidelity National (FIS) Up 3% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Fidelity National Information Services, Inc. FIS. Shares have added nearly 3% in that time frame underperforming the DJIA.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Fidelity Q4 Earnings Meet Estimates, Revenue Up Y/Y

Fidelity National Information Services’ fourth-quarter 2016 adjusted earnings per share from continuing operations came in at $1.14, in line with the Zacks Consensus Estimate. Earnings improved 22.6% from the year-ago quarter figure of $0.93.

The quarter recorded higher revenues and increased expenses.

Net earnings were $216 million or $0.63 in the reported quarter compared with $111 million or $0.36 in the prior-year quarter.

For 2016, adjusted earnings per share from continuing operations came in at $3.82, marginally lagging the Zacks Consensus Estimate of $3.83. Earnings jumped 18.6% from the year-ago quarter. Further, net earnings were $590 million or $1.74 per share compared with $651 million or $2.24 in the prior year.
 
Revenue Surged, Expenses Escalated

For 2016, revenues were $9.24 billion, up 40% year over year; but broadly missed the Zacks Consensus Estimate of $9.39 billion

Revenues of $2.45 billion in the fourth-quarter 2016 surged 30.3% year over year; but slightly lagged the Zacks Consensus Estimate of $2.47 billion.

Organic revenue growth was 4.8% in the reported quarter.

Selling, general and administrative expenses came in at $460 million, up 20.1% year over year.

Adjusted EBITDA grew 15.2% year over year to $846 million, while EBITDA margin was 34.4%.

Segment wise, Integrated Financial Solutions revenues grew 11.1% year over year to $1.2 billion. Revenues from Global Financial Solutions were up 51.6% year over year to $1.1 billion.

Balance Sheet & Cash Flow

Fidelity’s balance sheet remained highly leveraged at the end of the reported quarter. As of Dec 31, 2016, cash and cash equivalents were $683 million compared with $682 million as of Dec 31, 2015. Debt outstanding was nearly $10.5 billion.

In the quarter, net cash provided by operations was $583 million and free cash flow was $435 million.

Fidelity National paid dividends worth $86 million in the quarter.

Guidance for 2017

Fidelity projects organic revenue growth to be in the range of 2–3%, while reported revenue growth is estimated in the range of 1–2%.

Adjusted earnings per share are expected to be in the band of $4.15–$4.30, reflecting an increase of 9–13% year over year.

Adjusted EBITDA is expected in the range of $3.04–$3.12 billion.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been seven revisions lower for the current quarter. In the past month, the consensus estimate has shifted 7.68% downward due to these changes.

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Fidelity National Information Services, Inc. Price and Consensus

 

Fidelity National Information Services, Inc. Price and Consensus | Fidelity National Information Services, Inc. Quote

VGM Scores

At this time, Fidelity National's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% 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.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.


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Fidelity National Information Services, Inc. (FIS): Free Stock Analysis Report
 
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