Fiserv Inc. (
reported fourth quarter 2012 EPS of $1.39, which missed the Zacks
Consensus Estimate by a couple of cents. However, EPS increased
9.4% from the year-ago quarter and 9.9% sequentially driven by
lower expenses and higher margin expansion.
Revenues (excluding output solutions postage reimbursements)
remained almost flat on a year-over-year basis but climbed 3.4%
sequentially to $1.16 billion. This, however, missed the Zacks
Consensus Estimate of $1.19 billion.
Internal revenue growth was flat in the reported quarter due
to lower license revenues (down $25.0 million). As a result,
revenues from products plunged 16.3% year-over-year but increased
11.4% sequentially to $206.0 million. However, processing and
services revenues increased 3.8% year over year and 1.8% quarter
over quarter to $950.0 million.
The Payments and Industry Products revenues (excluding output
solutions postage reimbursements) increased 2.5% year over year
and 4.4% sequentially to $572.0 million. Internal revenue growth
was 3.0% in the quarter.
The high recurring revenues accruing from Fiserv's card
services and digital channels fully offset the negative impact
from the weaker performance of the investment services and bill
payment businesses. Biller solutions continued to suffer from the
Durbin effect during the quarter. Transaction volumes in the
debit business increased 15.0% year over year, driven by
expanding client base.
Fiserv extended its electronic payment and presentment
Bank of America (
for another 10-year term. Fiserv signed 113 electronic bill
payment clients and 40 debit processing clients in the quarter,
which include power generation company
American Electric Power (
and healthcare provider
. Fiserv also signed 134 Mobiliti clients and 113 Popmoney
clients in the quarter.
Financial Institution Services segment revenues decreased 3.0%
from the year-ago quarter but increased 2.1% sequentially to
$524.0 million. The year-over-year decline was primarily due to
lower license revenue.
The Corporate and Other segment recorded a loss of $12.0
million compared with a loss of $14.0 million in the year-ago
quarter and $12.0 million in the previous quarter.
Operating margin (excluding mergers, severance costs and
amortization of acquisition-related intangible assets) increased
80 basis points ("bps") on a year-over-year basis in the reported
quarter. The growth was primarily driven by higher recurring
revenues, which fully offset the negative impact from lower
license revenues. On a sequential basis, operating margin
expanded 110 bps.
The Payments and Industry Products' operating margin improved
10 bps from the year-ago quarter and 60 bps from the previous
quarter to 31.3%.
The Financial Institution Services segment's operating margin
declined 170 bps from the year-ago quarter but increased 10 bps
sequentially to 30.2%.
Corporate and Other segment witnessed an operating loss of $63
million, which decreased from $71 million loss incurred in the
year-ago quarter and $66.0 million in the previous quarter.
As of Dec 31, 2012, Fiserv had cash and cash equivalents of
$358.0 million, increasing from $307.0 million at the end of the
previous quarter. Long-term debt came to $3.23 billion compared
with $3.45 billion in the previous quarter.
Free cash flow surged 19.0% year over year to $271.0 million.
Fiserv repurchased 0.7 million shares in the fourth quarter.
For full year 2013, Fiserv expects revenue growth to be more
than 10.0% and adjusted internal revenue growth to be 3.0% -
4.5%. EPS is likely to be in the range of $5.88 -$6.07,
representing yearly growth of 15%- 18%.
Fiserv forecast free cash flow per share to be more than $6.60
per share, an increase of at least 18% over the prior year. The
company expects operating margin to expand in a range of 10 to 50
Fiserv forecasts revenues and earnings growth to be
sequentially stronger each quarter in 2013 attributable to large
recurring revenue client conversions in the second and third
quarter and positive synergies from the recent Open Solutions
acquisition (closed in January 2013).
Fiserv has expanded its foothold in the financial and payment
solutions business supported by its broad customer base,
diversified product portfolio and continued technology
upgrades. The company's advanced product ranges are likely
to further enhance its revenue streams. Moreover, the company's
various contract wins have enabled Fiserv to expand its presence
in the industry.
However, volatile macroeconomic environment, banking and
financial service consolidation, poor cash flow, tough
competition and increasing industry regulations are the primary
concerns in the near term.
Currently, Fiserv has a Zacks Rank #3 (Hold).
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