Fidelity National Information Services, Inc.FIS is set to release fourth-quarter 2015 earnings results on Feb 9. In the last quarter, the company reported a negative earnings surprise of 1.10%. The company delivered positive earnings surprises in two of the last four quarters, with an average positive earnings surprise of 0.40%.
Let's see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Fidelity is likely to beat earnings because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. The combination of Fidelity's Zacks Rank #3 and earnings ESP of +1.08% makes us confident in looking for an earnings beat this quarter.
Factors to Consider
Fidelity's commanding position in the financial services market, increasing international exposure, recurring revenue model, diversified product portfolio, cost synergies from acquisitions and a loyal customer base are significant positives.
Fidelity has been forming strategic partnerships with firms like Fifth Third Bank and American Blue Ribbon Holdings, which are expected to drive growth, going forward. Also, the company's initiatives to share profits with its investors like the recent dividend hike are positives.
Moreover, we believe that Fidelity is well positioned to benefit from increasing investment in mobile banking and innovative products such as PayNet. Mobile banking is developing into an essential extension of online banking as smartphone and tablet usage continue to accelerate globally.
Also, accretive acquisitions have played an important role. The acquisitions such as Metavante and Capco not only expanded its product and solutions portfolio but also provided significant synergies that drove top and bottom-line growth. In Nov 2015, the company acquired prominent financial software and technology services provider, SunGard for approximately $9.1 billion. The new company is expected to generate pro forma revenues of $9.3 billion in a year with employee strength of 55K.
However, the company had also been seeing weakness in its Professional Services business and sluggish demand from its large and global financial institution clients, which can pose some challenges. In addition, increasing consolidation in the banking sector, a challenging environment for the Payments Solutions business, stiff competition and an uncertain regulatory environment are the headwinds.
Stocks to Consider
Here are a few stocks you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Escalade Inc. ESCA , with an Earnings ESP of +18.18% and a Zacks Rank #2.
Time Warner Inc. TWX , with an Earnings ESP of +2.00% and a Zacks Rank #2.
The Walt Disney Company DIS , with an Earnings ESP of +2.08% and a Zacks Rank #3.