Fidelity National Information Services Inc. (
reported fourth-quarter 2013 earnings from continuing operations
of 76 cents per share, up 12.0% from the year-ago quarter, which
beat the Zacks Consensus Estimate by 9 cents.
Revenues increased 5.2% year over year (5.0% organic growth) to
$1.58 billion, which was slightly higher than the Zacks Consensus
Estimate. The year-over-year increase was primarily driven by
strong performances by the Financial Solutions and International
Revenues from Financial Solutions increased 4.3% year over year
to $603.5 million (4.0% organic growth), driven by strong growth
in consulting revenues and digital delivery solutions.
International Solutions revenues jumped 11.3% year over year
(13.0% organic growth) to $357.1 million. The strong growth was
driven by double-digit growth in Latin America and continued
growth in Europe and Asia.
Payment Solutions revenues increased 2.8% on a year-over-year
basis to $618.3 million. Revenues from check-related businesses
were $110.3 million, down 4.0% from the year-ago quarter.
Gross margin expanded 60 basis points (bps) to 37.5% due to
favorable business mix. Selling, general & administrative
expense (SG&A) as a percentage of revenues increased 80 bps
from the year-ago quarter.
Adjusted earnings before interest, tax, depreciation and
amortization (EBITDA) margin decreased 60 bps on a year-over-year
basis to 30.8% in the fourth quarter. This reflects higher
SG&A expense in the quarter.
Operating margin contracted 10 bps from the year-ago quarter to
24.6%. Higher margin financial solutions operating margin
declined 40 bps. However, payment and international solutions
operating margins expanded 180 bps and 10 bps, respectively.
Net income margin from continuing operations increased 70 bps
from the year-ago quarter to 14.1%.
Balance Sheet & Cash Flow
Fidelity's balance sheet remained highly leveraged at the end of
the fourth quarter of 2013. As of Dec 30, 2013, cash and cash
equivalents were $547.5 million compared with $811.6 million in
the previous quarter. Total debt (including the current portion)
at the end of the quarter was $4.47 billion compared with $4.82
billion in the previous quarter.
Fidelity generated $384.4 million in cash from operations versus
$311.1 million in the previous quarter. Free cash flow increased
to $333.7 million from $229.5 million in the previous quarter.
The company repurchased 2.5 million shares for $126.0 million
during the quarter.
For fiscal 2014, Fidelity expects revenues to grow in the range
of 4.5% to 5.0%. The company expects 2014 earnings to be in the
range of $3.05 to $3.16, an increase of 8.0% to 12.0% over 2012.
However, this is lower than the Zacks Consensus Estimate of
We believe Fidelity's commanding position in the financial
services market, increasing international exposure, recurring
revenue model, diversified product portfolio, cost synergies from
acquisitions and a loyal customer base will drive growth over the
Moreover, strong demand for its solutions such as Cardless Cash
Access solution and Active Analytics suite is expected to boost
top-line growth in the near term. The company continues to win
contracts from banks and financial institutions in the overseas
market, which will further drive its market share, going forward.
However, increasing consolidation in the banking sector,
challenging environment for the Payments Solutions business and
uncertain regulatory environment are the primary headwinds, in
our view. Moreover, competition from
Global Payments (
is a major concern in the near term.
Currently, Fidelity has a Zacks Rank #3 (Hold).
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