We continue to maintain a sideline stance on
Fiserv Inc.
(
FISV
), and thereby keep our Neutral recommendation on the company.
Fiserv is a world leader in providing financial services to
technology solutions which include E-commerce systems and other
services such as transaction processing, electronic bill payment
and presentment, business process outsourcing, document
distribution services, and software and systems solutions. The
company has been inclined towards making profitable acquisitions
over time, which include CheckFree Corporation, AdviceAmerica,
iTech Corporation among many othe rs.
The company's recent Carefree acquisition has been a crucial
turning point as Fiserv now focuses chiefly on high profit sectors
such as online banking solutions and electronic transaction
services. It has hence slowly started to steer away from its low
margin products including check processing and lending solution
services.
This move appears to be apt and wise considering the current
macro environment where the fiscal contagion continues to pervade
throughout the economy.
Recently acquired CashEdge Inc. by Fiserv in September 2011 with
the intent of diversifying and refining its digital payments and
channel strategies, surely is a profitable venture.
However, CashEdge seems to be dependent on untraceable P2P
solutions which can adversely affect current operations of Fiserv
and it would take time to stabilize in order to effectively
ameliorate gains for the company.
Even though heavy technology investments are being implemented
to improve demands, the company's acquisition trend seems to be
muted for now and we believe that it is advisable to remain on the
sidelines before being too perspicacious and predict what the
future has in store for the company.
In the recently announced third quarter 2011 results, FISV
reported a ne t earnings increase of 1.8% while its net earnings
per share came to $1.16, beating the Zacks Consensus Estimate of
$1.14. Operating margins declined slightly to 29.0% from 29.4% in
the previous year quarter.
Moreover, FISV continues to face stiff competition from big
players in the industry including
Fidelity National Information Services Inc.
(
FIS
),
Online Resources Corp.
(
ORCC
) and
Jack Henry and Associates Inc.
(
JKHY
).
The current Zacks Consensus Estimates for the fiscal years 2011
and 2012 are $4.58 and $5.11, respectively. In the short-run, we
have a Zacks #2 Rank for the stock, which translates into a
short-term rating of Buy. However, due to the current economic
slowdown, rising competition and clouded expectations from recent
acquisitions, we retain our long-term rating of Neutral for the
company.
FIDELITY NAT IN (
FIS
): Free Stock Analysis Report
FISERV INC (
FISV
): Free Stock Analysis Report
JACK HENRY ASSC (
JKHY
): Free Stock Analysis Report
ONLINE RES CORP (
ORCC
): Free Stock Analysis Report
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