Fiserv Inc.
(
FISV
) reported an adjusted income from continuing operations
(excluding one-time items) of $173 million or $1.27 per share in
the third quarter of 2012 compared to a net income of $166
million or $1.16 per share in the previous year quarter and $177
million or $1.28 per share in the second quarter of 2012.
Fiserv's earnings were in line with the Zacks Consensus
Estimate of $1.27 per share.
Revenues
Adjusted revenues (excluding output solutions postage
reimbursements) for Fiserv amounted to $1.05 billion, rising 4.7%
year over year and nearly 2% sequentially. Revenue growth across
the company's debit, account processing and mobile businesses was
the primary cause for the annual rise in adjusted revenues for
the quarter. This, however, missed the Zacks Consensus Estimate
of $1.12 billion.
The Payments and Industry Products segment reported adjusted
revenues of $548 million, up 4.2% year over year and nearly 2%
sequentially. The high recurring revenues accruing from the
company's card services and digital channels, offsetting the
adverse impact from the investment services and Durbin effect on
the company's biller business, drove the segment's revenue during
the quarter.
The Financial Institution Services segment revenues came in at
$513 million, up 5.3% and 2.2% sequentially, led by the company's
Account Processing and Lending business sales.
The Corporate and Other segment recorded a loss of $12
million, up 9.1% year over year and 9.1% sequentially.
Margins
Adjusted operating margin (excluding mergers, severance costs
and amortization of acquisition-related intangible assets) in the
quarter came to 29.8%, compared with 29.0% in the year earlier
quarter and it also increased by 50 basis points from the last
quarter. The rise was attributable to the company's improved
performance in its Financial Institution Services segment and
increased operational efficiencies achieved during the
quarter.
The Payments and Industry Products' adjusted operating margin
was 30.7% compared to 30.8% in the year-ago quarter and 29.8% in
the last quarter. Strengthening Fiserv's mobile and online
banking services, the coalition of CashEdge and the adverse
impact from bill payment deconversions adversely affected the
segment's margin.
The Financial Institution Services segment's operating margin
came in at 32.1%, rising from 29.4% in the previous year quarter
but declining from 32.5% in the previous quarter. The company's
increased license and termination fee revenue and higher
efficiency gains were the primary causes for the rise in the
margins in the quarter. The company's operational efficiency also
positively impacted the quarter's margins.
Corporate and Other segment witnessed an operating loss of $21
million, which remains flat sequentially but increased from $15
million loss incurred in the prior year quarter.
Balance Sheet and Cash Flow
As of September 30, 2012, the company had cash and cash
equivalents of $307 million, increasing from $302 million at the
end of the previous quarter. In addition, net trade accounts
receivable came in for $643 million, rising from $606 million at
the end of the previous quarter. Long-term debt came to $3.4
billion compared with $3.2 billion in the previous quarter.
Net cash provided by operating activities amounted to $548
million in the first nine months of 2012 compared to $681 million
in the previous year period. Capital expenditures incurred were
$146 million versus $144 million in the year-ago period.
Share Repurchase
During the third quarter of 2012, Fiserv repurchased 2.7
million shares worth $189 million, bringing the total to 8.5
million shares for $577 million during the first nine months of
2012. Under the existing share repurchase authorization program,
Fiserv has about 6 million shares remaining for repurchase.
Outlook
Management reiterated its guidance for 2012. Annual adjusted
revenue growth is expected to be 4% - 6% and adjusted internal
revenue growth to be 3.0% - 4.5%. The adjusted EPS is likely to
be in the range of $5.08 - $5.20, representing a yearly growth of
11% - 14%.
The adjusted operating margin is expected to increase annually
by 30 basis points to 60 basis points for 2012. Free cash flow
growth is anticipated to be within 8% - 12%.
Headquartered in Brookfield, Wisconsin, Fiserv engaged in
providing financial services technology solutions, including
electronic commerce systems and services, such as transaction
processing, electronic bill payment and presentment, business
process outsourcing, document distribution services, and software
and systems solutions. The company's primary competitors include
big players such as
Mastercard Incorporated
(
MA
),
Fidelity National Information Services, Inc
. (
FIS
) and
Total System Services, Inc
. (
TSS
).
Our Take
The company currently retains a Zacks #2 Rank, which
translates into a short-term 'Buy' rating. We also maintain a
long-term 'Neutral' recommendation on the stock.
FIDELITY NAT IN (FIS): Free Stock Analysis
Report
FISERV INC (FISV): Free Stock Analysis Report
MASTERCARD INC (MA): Free Stock Analysis
Report
TOTAL SYS SVC (TSS): Free Stock Analysis
Report
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