Fiserv Inc. (
reported fourth-quarter earnings of 79 cents per share, which
lagged the Zacks Consensus Estimate by a couple of cents.
Earnings per share (excluding merger and integration costs,
severance costs, amortization of acquisition-related intangible
assets, and gains related to stoneRiver transaction) increased
14.5% from the year-ago quarter.
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Revenues (excluding output solutions postage reimbursements and
Open Solutions deferred revenue adjustment) increased 10.4% year
over year to $1.19 billion. Revenues, however, missed the Zacks
Consensus Estimate of $1.27 billion. Internal revenue
growth was 4.0% in the quarter.
Product revenues increased 9.2% year over year to $225.0 million.
Processing and services revenues increased 10.5% year over year
to $1.04 billion.
Payments and Industry Products revenues (all internal) increased
6.2% from the year-ago quarter to $596.0 million. The strong
year-over-year growth was driven by robust performance from Debit
(volume up 13.0%) and Biller Solutions (transaction volume up
Fiserv signed 77 new clients, which took the total number of
clients for Mobiliti solution up to 1,800 at the end of the
fourth quarter. Client demand for Popmoney solution continues to
remain strong as Fiserv signed 98 new institutions in the
quarter. During the quarter, Fiserv signed 96 electronic bill
payment clients and 44 debit processing clients.
Fiserv continues to proceed rapidly with Open Solutions
integration (acquired Jan 14, 2013). Open Solutions' primary
product DNA has gained significant momentum as Fiserv won 10 new
contracts in the reported quarter.
Financial Institution Services segment revenues increased 14.5%
from the year-ago quarter to $600.0 million. Internal revenues
increased 2.0% from the year-ago quarter. The year-over-year
growth was primarily due to robust revenue contribution from the
Open Solutions acquisition.
Total expenses (cost of processing & services, cost of
products and selling, general and administrative expense) as a
percentage of revenues increased 150 basis points (bps) from the
year-ago quarter to 81.5%.
Operating margin (excluding mergers, severance costs and
amortization of acquisition-related intangible assets) contracted
30 bps on a year-over-year basis to 30.5% in the quarter.
Financial Institution Services operating margin increased 200 bps
from the year-ago quarter. Scale efficiencies and operational
effectiveness savings, including synergies from the Open
Solutions acquisitions, primarily led to this adjusted operating
Payments and Industry Products operating margin declined 50 bps
from the year-ago quarter to 30.9%. The year-over-year decline
was due to the unfavorable product mix, lower license revenues
and higher variable compensation.
The Corporate and Other segment witnessed an operating loss of
$30.0 million, which deteriorated from the $18.0 million loss
incurred in the year-ago quarter.
Fiserv exceeded its operational effectiveness goal of $60.0
million, which includes the Open Solutions cost synergy target,
by 35% in 2013. The company achieved $81.0 million of savings.
Exiting the third year of this 5-year program, the company has
generated $188.0 million of annual savings, which is
approximately 50% more than the scheduled target.
As of Dec 31, 2013, Fiserv had cash and cash equivalents of
$400.0 million, up from $321.0 million at the end of the previous
quarter. Long-term debt was $3.76 billion compared with $3.93
billion in the previous quarter. Fiserv repurchased 2.3 million
shares for $124.0 million in the fourth quarter.
For fiscal 2014, adjusted revenues are expected to increase in
the range of 4.0% to 5.0%. Adjusted internal revenues are
expected to increase in the range of 4.0% to 4.5%
Earnings per share are likely to be in the range of $3.28 to
$3.37, representing yearly growth of 10.0% to 13.0%. However, the
mid-point of this guidance range is lower than the Zacks
Consensus Estimate of $3.35.
The company expects to post stronger results in the second half
of 2014, primarily due to mix of sales and timing of client
Fiserv forecasts free cash flow per share to be up at least 10%
to more than $3.65 per share. The company expects operating
margin to expand at least 50 bps for the full year. For 2014,
Fiserv's operational effectiveness goal remains at $60.0 million.
Fiserv has expanded its foothold in the financial and payment
solutions business supported by its broad customer base and
various contract wins from the likes of
Bank of America (
, TD bank and American Electric Power and Humana.
Fiserv's diversified product portfolio and continued technology
upgrades are expected to boost its top-line growth. Higher
synergies (both top-line and cost) from the Open Solutions
acquisition and continuous contract wins by the DNA platform are
expected to drive growth over the next couple of years.
The company continues to add clients for its bill payment,
mobility and Popmoney solutions. Higher recurring revenues,
operational efficiencies and strong internal growth are expected
to result in solid earnings and free cash flow growth.
However, the back-end loaded guidance is expected to remain a
concern in 2014. We also believe intensifying competition from
the likes of
Global Payments (
MasterCard Inc (
remains a major headwind, going forward.
Currently, Fiserv has a Zacks Rank #3 (Hold).