Fidelity National Information Services Inc.
) reported fourth-quarter 2012 non-GAAP earnings of 68 cents per
share, up 4.6% from the year-ago quarter. Including stock-based
compensation of 5 cents, earnings came in at 63 cents per share,
lagging the Zacks Consensus Estimate of 68 cents per share.
Revenues increased 2.7% year over year to $1.50 billion but
marginally missed the Zacks Consensus Estimate of $1.51 billion.
The year-over-year increase was primarily driven by strong
performance from its Financial Solutions segment.
Revenues from Financial Solutions increased 8.4% year over
year to $578.4 million (6.4% organically). International
Solutions revenue inched up 0.7% year over year to $320.9
million. Organically, the segment grew 5.9% from the year-ago
Payment Solutions revenue decreased 1.2% on a year-over-year
basis to $601.3 million. Excluding check-related business,
Payment Solutions revenue increased moderately, driven by
continuous increase in electronic transactions and growth in
Fidelity's fourth quarter was primarily driven by
better-than-expected margin expansion, which offset the sluggish
revenue growth. Non-GAAP gross profit increased 3.7% year over
year to $553.0 million. Gross margin expanded 40 basis points
("bps") to 36.9% on the back of favorable business mix.
As far as expenses are concerned, selling, general &
administrative expense ("SG&A") on a non-GAAP basis increased
4.2% year over year to $181.4 million in the reported quarter.
Including stock-based compensation of $24.7 million, SG&A
expense came in at $206.5 million.
Operating income on a non-GAAP basis increased 3.5% from the
year-ago quarter to $371.2 million. Operating margin expanded 10
bps to 24.7%. Including stock-based compensation of $24.7
million, operating income came in at $346.5 million with an
operating margin of 23.1%.
Net income from continuing operations on a non-GAAP basis
increased 3.5% from the year-ago quarter to $201.4 million.
Including stock-based compensation of 16.3 million, net income
from continuing operations came in at 185.1 million.
Fidelity's balance sheet remained highly leveraged at the end
of the third quarter of 2012. As of Dec 31, 2012, cash and cash
equivalents were $517.6 million compared with $576.6 million in
the previous quarter. Total debt (including the current potion)
at the end of the quarter was $4.39 billion compared with $4.53
billion in the previous quarter.
Fidelity generated $328.7 million in cash from operations
versus $255.4 million in the previous quarter. Free cash flow
increased to $365.0 million from $193.2 million in the previous
For fiscal 2013, Fidelity expects revenues to grow in the
range of 4% to 6%. Organic revenue growth is expected in the
range of 3% to 5%. Fidelity also expects its earnings per share
to be between $2.77 and $2.87.
We believe that 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 long term.
Moreover, we believe that Fidelity's expansion into emerging
markets such as Brazil, India and Asia-Pacific will drive organic
revenue growth going forward. Additionally, the company's
favorable EPS outlook for fiscal 2013 also bodes well with the
company's future growth prospects.
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
) are the headwinds for the company.
Currently, Fidelity has a Zacks Rank #2 (Buy).
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