Fidelity (FIS) Q2 Earnings Beat Estimates, Expenses Increase
Fidelity National Information Services’ FIS 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.
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 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.