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Fidelity (FIS) Q2 Earnings Beat Estimates, Expenses Increase

Fidelity National Information ServicesFIS second-quarter 2020 adjusted earnings per share from continuing operations were $1.15, surpassing the Zacks Consensus Estimate of $1.10. The bottom line, however, compared unfavorably with the year-ago quarter figure of $1.30.

Strong liquidity position and expanding margin were the key tailwinds. However, a rise in expenses posed a key concern. Also, a fall in organic revenues was a headwind.

On a GAAP basis, the company reported net earnings attributable to common stockholders of $19 million or 3 cents per share compared with $154 million or 47 cents per share in the prior-year quarter.

Organic Revenues Decline, Expenses Flare Up

GAAP revenues in the quarter were $2.96 billion, up 40% year over year. The upside mainly stemmed from the acquisition of Worldpay. Also, the figure surpassed the Zacks Consensus Estimate of $2.89m million.

Organic revenues declined nearly 7% in the quarter primarily due to reduced consumer spending trends caused by shelter-in-place, lockdown orders and other impacts of the COVID-19 pandemic.

Selling, general and administrative expenses were $870 million, up significantly from $317 million in the year-ago quarter.

Segment wise, Merchant Solutions’ GAAP revenues grew to $812 million from $97 million in the year-ago quarter. Revenues from Banking Solutions rose 9% to $1.48 million. Capital Market Solutions’ revenues rose 6% to $629 million.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) increased to $1.16 billion from $794 million in the year-ago quarter. Adjusted EBITDA margin expanded 150 basis points to 39.1%.

Balance Sheet & Cash Flow

As of Jun 30, 2020, cash and cash equivalents were $1.18 billion compared with $1.15 billion as of Dec 31, 2019. Debt outstanding was $19.9 billion.

In the second quarter, net cash provided by operations was $1.23 billion and free cash flow increased 58.6% from the prior-year quarter to $655 million.

The company paid out dividends worth $217 million in the reported quarter.

Our Viewpoint

Fidelity’s dominant position in financial and payments solutions business, backed by a robust product portfolio, keeps us encouraged. Notably, the merger of Fidelity and Worldpay will provide clients of both organizations access to a wider portfolio of digital assets for accelerating revenue growth.

However, increasing consolidation in the banking sector, a challenging environment for the Payments Solutions business and an uncertain regulatory environment are key headwinds.

Fidelity National Information Services, Inc. Price, Consensus and EPS Surprise

 

Fidelity National Information Services, Inc. Price, Consensus and EPS Surprise

Fidelity National Information Services, Inc. price-consensus-eps-surprise-chart | Fidelity National Information Services, Inc. Quote

Fidelity currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Cullen/Frost Bankers, Inc. CFR reported second-quarter 2020 earnings per share of $1.47, which handily surpassed the Zacks Consensus Estimate of 71 cents. However, it compares unfavorably with the prior-year quarter figure of $1.72 per share.

Credit Acceptance Corporation CACC reported second-quarter 2020 earnings of $5.40 per share, beating the Zacks Consensus Estimate of $4.65. The company recorded earnings of $8.68 per share in the prior-year quarter. Notably, the figure includes certain non-recurring items.

New York Community Bancorp, Inc. NYCB reported second-quarter 2020 earnings per share of 21 cents, which surpassed the Zacks Consensus Estimate of 19 cents. Also, the figure compared favorably with the prior-year quarter figure of 19 cents.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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