Year 2011 ended with an impressive revenue growth and buy-back
activities. However, we continue to maintain a Neutral stance on
Fiserv Inc.
(
FISV
).
ZashPay and Mobile Money continue to fuel recurring revenues for
Fiserv as it gets ready for 2012. The company has been privileged
enough to accrue gains from a high customer retention ratio which
bolsters long-term stability in its dealings with the outside
market.
Catering to investor interests has always been of primary
importance to the company. Not long ago, its Board of Directors
authorized a new share repurchase program to buy back an additional
10 million shares of its common stock, which represents 7% of its
current outstanding market shares.
We witnessed a strong 2011 and an upbeat revenue outlook for the
coming year. The company recorded adjusted revenues of $4 billion
for the year on the backs of strong annual sales across both its
major segments. Furthermore, Fiserv did not cower under the
pressure of existing threats accruing from contract renewal
uncertainties and softness from financial services but posted a
decent 4% - 6% adjusted revenue growth expectation for 2012.
Fiserv is a big name with widely international operations which
make it vulnerable to both macro-economic fluctuations and endemic
hindrances. However, it is commendable that the company never fails
to achieve its long-term targets, which are continually upgraded
from time to time. Currently, free cash flow of $2.5 billion is
projected to generate over the next three years along with cost
savings of $250 million over the next four years. Such tenacity
along with ossified determination makes this company even more
attractive to invest in, particularly for the long run.
Even though the scenario looks quite pristine and incorruptible,
there are a few downsides which remain irrefragable. In an industry
where aspects like loan demand declines, unrecognized revenue
sources etc. are prevalent to make survival precarious; Fiserv does
not appear to stand in a formidable position with few of its
existing bottlenecks adding to the onus of the company.
The CashEdge acquisition, which can arguably be called the
company's most momentous acquisition till date, continues to remain
onerous to Fiserv. We believe it to be ideal for the long run
yielding revenues of up to $160 million in 2014; however, in recent
times it paints a disappointing picture on the parent company's
financial position.
Fiserv faces major competitors in its industry which include
names such as
Heartland Payment Systems Inc.
(
HPY
),
Equifax Inc.
(
EFX
) and
Visa Inc.
(
V
). It is imperative that Fiserv pays heed to removing bottlenecks
such as low margin performance and due contract renewals to retain
its position in the industry.
Judging by the present situation, we believe that the company
needs to show vigor in its upcoming quarters to battle off its
portents and emerge victorious. Hence, we find it wise to maintain
a sideline view on the company's stock for now.
EQUIFAX INC (
EFX
): Free Stock Analysis Report
FISERV INC (
FISV
): Free Stock Analysis Report
HEARTLAND PAYMT (
HPY
): Free Stock Analysis Report
VISA INC-A (
V
): Free Stock Analysis Report
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