Fidelity National Information Services Inc.
) reported first quarter 2012 earnings (including stock based
compensation) of 51 cents per share, which was in-line with the
Zacks Consensus Estimate. However, the reported earnings increased
13.3% from 45 cents reported in year-ago quarter. The quarterly
result was aided by top-line growth during the quarter.
Revenues in the first quarter climbed 4.6% year over year to
$1.45 billion and squeaked past the Zacks Consensus Estimate of
$1.44 billion. Revenues increased 5.3% on an organic basis, driven
by strong results from Financial Solutions and International
Financial Solutions revenue rose 7.0% year over year to $538.9
million, on the back of growth in account processing and higher
services revenue. Payment Solutions revenue increased 2.6% year
over year to $630.6 million.
Excluding the check-related business, Payment Solutions revenue
was up 4.2% from the previous-year quarter. Revenue growth in the
segment was supported by increase in electronic transactions.
International Solutions revenue increased 3.2% year over year
(7.1% organically) to $276.8 million. Revenue was positively
impacted by higher volumes of electronic transactions and services
in Brazil and Europe. Additionally, Capco's international
operations contributed to the increase.
Gross profit for the quarter was $499.8 million, up 10.7% from
the previous-year quarter. Gross margin expanded 190 basis points
(bps) to 34.5% on the back of higher revenue base and prudent
Operating income (including stock based compensation) rose 5.3%
year over year to $292.7 million, riding on strong revenue growth
and better-than-expected gross margin. Operating margin was 20.2%
for the quarter compared with 20.1% in the prior-year quarter.
Exiting 1Q12, cash and cash equivalents were $481.7 million
compared with $415.5 million in 4Q11. Total debt (including the
current potion) at the end of the quarter was $4.84 billion
compared with $4.81 billion in the previous quarter.
Fidelity generated $203.8 million in adjusted cash from
operations versus $308.3 million in the previous quarter. Free cash
flow (on an adjusted basis) slumped to $136.4 million from $221.6
million in the previous quarter.
For fiscal 2012, Fidelity expects organic revenue growth to
range between 3% and 5%. Management expects EBITDA to grow in the
range of 5%-7%. Margins are expected to expand by 40-80 bps.
Moreover, management expects EPS in the range of $2.47-$2.57 for
fiscal 2012. The Zacks Consensus Estimate is pegged at $2.53 per
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. We also believe that Fidelity's expansion into emerging
markets such as Brazil and Europe will drive organic revenue growth
However, increasing consolidation in the banking sector,
challenging environment for the Payments Solutions business and
uncertain regulatory environment are the primary headwinds, in our
We maintain our Neutral recommendation on a long-term basis (for
the next 6 to 12 months), primarily due to a highly leveraged
balance sheet and intense competition from other major players such
Currently, Fidelity has a Zacks #3 Rank, which implies a
short-term Hold rating (for the next 1-3 months).
FIDELITY NAT IN (
): Free Stock Analysis Report
FISERV INC (
): Free Stock Analysis Report
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