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Zacks Industry Outlook Highlights Visa, Mastercard, Fiserv, FLEETCOR Technologies and WEX
Read MoreHide Full Article
For Immediate Release
Chicago, IL – May 19, 2023 – Today, Zacks Equity Research discusses Visa Inc. (V - Free Report) , Mastercard Inc. (MA - Free Report) , Fiserv, Inc. , FLEETCOR Technologies, Inc. and WEX Inc. (WEX - Free Report) .
The Financial Transaction Services industry is likely to gain on the back of the widespread uptake of digital means, leading to solid transaction volumes. A tactical merger and acquisition (M&A) strategy and tech investments enable the players to devise an advanced digital solutions suite. Resilient consumer spending, despite continued inflationary pressure, bodes well. Growing cross-border volumes resulting from a recovery in travel might boost the revenue growth of industry players. Companies like Visa Inc., Mastercard Inc., Fiserv, Inc., FLEETCOR Technologies, Inc. and WEX Inc. are well-placed to gain from the industry's encouraging growth prospects.
About the Industry
The Zacks Financial Transaction Services industry is part of the Financial Technology or the FinTech space, which includes companies with varying natures of businesses. The industry comprises card and payment processing and other solutions providers, ATM services and money remittance service providers, and providers of investment solutions to financial advisors.
The players in this segment operate their unique and proprietary global payments network that links issuers and acquirers around the globe, facilitating the switching of transactions and permitting account holders to use their products at millions of acceptance locations. Monetary transactions are executed through these networks, offering a convenient, quick and secure payment method in several currencies across the globe. The industry is benefiting from the ongoing digitization movement, triggered by the pandemic.
4 Trends Defining the Fate of the Financial Transaction Services Industry
Growing Digitization: The pandemic led to a widespread inclination toward adopting digital means. Amid several roadblocks thrown by the pandemic, people became aware about the convenience and affordability brought about by digital payments. A diversified set of flexible payment options, ranging from buy now, pay later solutions, mobile wallets, biometrics, to QR code utilization, came to the forefront.
The world witnessed a higher Internet penetration rate and increased usage of smartphones. Thereby, financial transaction services stocks were compelled to launch contactless payment solutions or upgrade the existing ones in order to capture a sizable share of the global digital payments market. For such growth-related initiatives, the companies frequently resort to innovative technologies, which in turn, might escalate costs. However, digital prowess is pivotal in bolstering the customer base and diversifying income streams for the industry players in the long term.
A Prudent M&A Strategy: Apart from tech investments, an active M&A strategy is crucial to developing an efficient digital suite for financial transaction services companies. The pursuit of such a strategy also reflects their intensified focus on entering new markets, widening market share and attracting customers. Though interest rates were increased aggressively by governments of different countries in order to tame inflation, the percentage of increase seems to have somewhat slowed down.
This, in turn, is likely to bring down borrowing costs, making it easier for companies to opt for loans to finance M&A deals and avoid complete exhaustion of cash reserves. An exciting year awaits, with respect to M&A deals, according to PwC's Global M&A Industry Trends: 2023 Outlook.
Favorable Consumer Spending: Strong wage gains resulting from a tight labor market and substantial savings in hand keep the purchasing power of consumers steady amid looming fears of inflation and recession. The ease and affordability of e-commerce shopping continue to drive consumer spending growth and enable industry players to process a larger amount of transaction volumes through their card offerings. Per the U.S. Bureau of Economic Analysis, consumer spending increased by $129.6 billion sequentially in the first quarter of 2023. Market and consumer data provider, Statista estimates consumer spending to witness 34.8% growth over the 2023-2028 period.
Rebounding Cross-Border Travel: People are now likely to travel across the world, which can be either for recreational purposes or for business. With organizations preferring a return-to-office policy, business travel is likely to remain on an uptrend in the days ahead. These factors have led to a recovery in international travel, thus driving cross-border volumes of companies in the financial transaction services space. In order to handle the growing pace of business travel, the industry players have come up with innovative business travel solutions for easier flight bookings.
Zacks Industry Rank Instills Optimism
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all-member stocks, indicates bright near-term prospects. The Zacks Financial Transaction Services industry is housed within the broader Zacks Business Services sector. It currently carries a Zacks Industry Rank #110, which places it in the top 44% of more than 250 Zacks industries.
Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1. The industry's positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate.
Before we present a few stocks that you may want to buy or retain in your portfolio, let's take a look at the industry's recent stock-market performance and valuation picture.
Industry Outperforms S&P 500 & Sector
The Zacks Financial Transaction Services industry has outperformed not only the Zacks S&P 500 composite but also its sector as well in the past year.
In the said time frame, the industry has gained 5.9% compared with the S&P 500's 5.6% rally. The Zacks Business Services sector has declined 5.1% in the same time frame.
Industry's Current Valuation
On the basis of the forward 12-month Price/Earnings ratio, commonly used for valuing financial transaction services stocks, the industry is currently trading at 20.92X compared with the S&P 500's 18.3X and the sector's 22.1X.
Over the last five years, the industry traded as high as 32.28X, as low as 17.68X and at the median of 25.03X.
5 Stocks to Keep a Close Eye on
We are presenting five stocks from the space currently carrying a Zacks Rank #3 (Hold). Considering the current industry scenario, it might be prudent for investors to retain these stocks in their portfolio as these are well-placed to generate growth in the long haul.
Visa: Based in San Francisco, CA, Visa is focused on transforming consumer spending habits from cash to cards and digital platforms. While Visa's core products drive most of its growth, it has also ventured into contactless payment solutions, such as Tap to Pay, Tokenization and Click to Pay to provide a seamless user experience. Recovery in cross-border travel coupled with stable payments volume provides an impetus to V's performance.
The Zacks Consensus Estimate for Visa's fiscal 2023 earnings is pegged at $8.58 per share, indicating a 14.4% rise from the year-ago reported figure. The consensus mark for fiscal-year revenues implies a 10.9% improvement from the year-ago actual. V's earnings beat estimates in each of the last four quarters, the average being 8.03%. Shares of Visa have rallied 17.9% in a year.
Mastercard: Headquartered in Purchase, NY, Mastercard continues to benefit from increased travel and entertainment-related spending. MA's gross dollar volume gains on increased usage of its cards across domestic and international markets. Also, processed transactions are driven by improved consumer spending. It frequently resorts to tie-ups with local financial institutions to occupy a significant share of the worldwide digital payments market.
The Zacks Consensus Estimate for Mastercard's 2023 earnings is pegged at $12.27 per share, indicating a 15.2% improvement from the year-ago reported figure. The consensus mark for current-year revenues suggests 13.1% growth from the year-ago actual. MA's earnings beat estimates in each of the last four quarters, the average being 4.90%. Its shares have gained 16.5% in a year.
Fiserv: Based in Brookfield, WI, Fiserv's diversified product portfolio continues to yield a steady flow of customers. The increasing demand for digital banking and payment services provides significant growth opportunities for Fiserv. It continues to expand its product portfolio through strategic acquisitions. The Merchant Acceptance segment benefits from Fiserv's SMB, Clover and Carat platforms.
The Zacks Consensus Estimate for Fiserv's 2023 earnings is pegged at $7.36 per share, indicating a 13.4% rise from the year-ago reported figure. The consensus mark for current-year revenues implies a 7% improvement from the year-ago actual. The consensus mark for 2023 earnings has been revised 0.5% north over the past 30 days. Its shares have advanced 26.8% in a year.
FLEETCOR Technologies: Based in Atlanta, GA, FLEETCOR Technologies is aided by solid organic revenue growth resulting from strength in its product categories, namely fuel, corporate payments and, tolls and lodging. Growing transaction volumes coupled with revenue retention and client acquisition efforts also act as tailwinds for the stock. Its widespread global presence enables FLT to enter new customer markets.
The Zacks Consensus Estimate for FLEETCOR Technologies' 2023 earnings is pegged at $17.06 per share, indicating a 6% rise from the year-ago reported figure. The consensus mark for current-year revenues hints at an 11.6% uptick from the year-ago actual. FLT's earnings beat estimates in each of the last four quarters, the average being 3.67%. Its shares have rallied 2.8% in a year.
WEX: Headquartered in Portland, ME, WEX is being aided by an extensive fuel network and service providers, improved transaction volumes, product excellence, marketing prowess, sales force productivity and other strategic revenue generation efforts. Customer retention rates remain strong, driven by well-performing private-label portfolios, and value-added product and service offerings. Acquisitions remain a key growth catalyst for WEX.
The Zacks Consensus Estimate for WEX's 2023 earnings is pegged at $14.04 per share, which indicates a rise of 3.8% from the 2022 figure. The consensus mark for current-year revenues suggests a 5.7% growth from the year-ago actual. WEX's earnings beat estimates in each of the last four quarters, the average being 5.36%. Its shares have gained 11.9% in a year.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights Visa, Mastercard, Fiserv, FLEETCOR Technologies and WEX
For Immediate Release
Chicago, IL – May 19, 2023 – Today, Zacks Equity Research discusses Visa Inc. (V - Free Report) , Mastercard Inc. (MA - Free Report) , Fiserv, Inc. , FLEETCOR Technologies, Inc. and WEX Inc. (WEX - Free Report) .
Industry: Financial Services
Link: https://www.zacks.com/commentary/2096760/5-financial-transaction-stocks-to-watch-as-digitization-gains-pace
The Financial Transaction Services industry is likely to gain on the back of the widespread uptake of digital means, leading to solid transaction volumes. A tactical merger and acquisition (M&A) strategy and tech investments enable the players to devise an advanced digital solutions suite. Resilient consumer spending, despite continued inflationary pressure, bodes well. Growing cross-border volumes resulting from a recovery in travel might boost the revenue growth of industry players. Companies like Visa Inc., Mastercard Inc., Fiserv, Inc., FLEETCOR Technologies, Inc. and WEX Inc. are well-placed to gain from the industry's encouraging growth prospects.
About the Industry
The Zacks Financial Transaction Services industry is part of the Financial Technology or the FinTech space, which includes companies with varying natures of businesses. The industry comprises card and payment processing and other solutions providers, ATM services and money remittance service providers, and providers of investment solutions to financial advisors.
The players in this segment operate their unique and proprietary global payments network that links issuers and acquirers around the globe, facilitating the switching of transactions and permitting account holders to use their products at millions of acceptance locations. Monetary transactions are executed through these networks, offering a convenient, quick and secure payment method in several currencies across the globe. The industry is benefiting from the ongoing digitization movement, triggered by the pandemic.
4 Trends Defining the Fate of the Financial Transaction Services Industry
Growing Digitization: The pandemic led to a widespread inclination toward adopting digital means. Amid several roadblocks thrown by the pandemic, people became aware about the convenience and affordability brought about by digital payments. A diversified set of flexible payment options, ranging from buy now, pay later solutions, mobile wallets, biometrics, to QR code utilization, came to the forefront.
The world witnessed a higher Internet penetration rate and increased usage of smartphones. Thereby, financial transaction services stocks were compelled to launch contactless payment solutions or upgrade the existing ones in order to capture a sizable share of the global digital payments market. For such growth-related initiatives, the companies frequently resort to innovative technologies, which in turn, might escalate costs. However, digital prowess is pivotal in bolstering the customer base and diversifying income streams for the industry players in the long term.
A Prudent M&A Strategy: Apart from tech investments, an active M&A strategy is crucial to developing an efficient digital suite for financial transaction services companies. The pursuit of such a strategy also reflects their intensified focus on entering new markets, widening market share and attracting customers. Though interest rates were increased aggressively by governments of different countries in order to tame inflation, the percentage of increase seems to have somewhat slowed down.
This, in turn, is likely to bring down borrowing costs, making it easier for companies to opt for loans to finance M&A deals and avoid complete exhaustion of cash reserves. An exciting year awaits, with respect to M&A deals, according to PwC's Global M&A Industry Trends: 2023 Outlook.
Favorable Consumer Spending: Strong wage gains resulting from a tight labor market and substantial savings in hand keep the purchasing power of consumers steady amid looming fears of inflation and recession. The ease and affordability of e-commerce shopping continue to drive consumer spending growth and enable industry players to process a larger amount of transaction volumes through their card offerings. Per the U.S. Bureau of Economic Analysis, consumer spending increased by $129.6 billion sequentially in the first quarter of 2023. Market and consumer data provider, Statista estimates consumer spending to witness 34.8% growth over the 2023-2028 period.
Rebounding Cross-Border Travel: People are now likely to travel across the world, which can be either for recreational purposes or for business. With organizations preferring a return-to-office policy, business travel is likely to remain on an uptrend in the days ahead. These factors have led to a recovery in international travel, thus driving cross-border volumes of companies in the financial transaction services space. In order to handle the growing pace of business travel, the industry players have come up with innovative business travel solutions for easier flight bookings.
Zacks Industry Rank Instills Optimism
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all-member stocks, indicates bright near-term prospects. The Zacks Financial Transaction Services industry is housed within the broader Zacks Business Services sector. It currently carries a Zacks Industry Rank #110, which places it in the top 44% of more than 250 Zacks industries.
Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1. The industry's positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate.
Before we present a few stocks that you may want to buy or retain in your portfolio, let's take a look at the industry's recent stock-market performance and valuation picture.
Industry Outperforms S&P 500 & Sector
The Zacks Financial Transaction Services industry has outperformed not only the Zacks S&P 500 composite but also its sector as well in the past year.
In the said time frame, the industry has gained 5.9% compared with the S&P 500's 5.6% rally. The Zacks Business Services sector has declined 5.1% in the same time frame.
Industry's Current Valuation
On the basis of the forward 12-month Price/Earnings ratio, commonly used for valuing financial transaction services stocks, the industry is currently trading at 20.92X compared with the S&P 500's 18.3X and the sector's 22.1X.
Over the last five years, the industry traded as high as 32.28X, as low as 17.68X and at the median of 25.03X.
5 Stocks to Keep a Close Eye on
We are presenting five stocks from the space currently carrying a Zacks Rank #3 (Hold). Considering the current industry scenario, it might be prudent for investors to retain these stocks in their portfolio as these are well-placed to generate growth in the long haul.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Visa: Based in San Francisco, CA, Visa is focused on transforming consumer spending habits from cash to cards and digital platforms. While Visa's core products drive most of its growth, it has also ventured into contactless payment solutions, such as Tap to Pay, Tokenization and Click to Pay to provide a seamless user experience. Recovery in cross-border travel coupled with stable payments volume provides an impetus to V's performance.
The Zacks Consensus Estimate for Visa's fiscal 2023 earnings is pegged at $8.58 per share, indicating a 14.4% rise from the year-ago reported figure. The consensus mark for fiscal-year revenues implies a 10.9% improvement from the year-ago actual. V's earnings beat estimates in each of the last four quarters, the average being 8.03%. Shares of Visa have rallied 17.9% in a year.
Mastercard: Headquartered in Purchase, NY, Mastercard continues to benefit from increased travel and entertainment-related spending. MA's gross dollar volume gains on increased usage of its cards across domestic and international markets. Also, processed transactions are driven by improved consumer spending. It frequently resorts to tie-ups with local financial institutions to occupy a significant share of the worldwide digital payments market.
The Zacks Consensus Estimate for Mastercard's 2023 earnings is pegged at $12.27 per share, indicating a 15.2% improvement from the year-ago reported figure. The consensus mark for current-year revenues suggests 13.1% growth from the year-ago actual. MA's earnings beat estimates in each of the last four quarters, the average being 4.90%. Its shares have gained 16.5% in a year.
Fiserv: Based in Brookfield, WI, Fiserv's diversified product portfolio continues to yield a steady flow of customers. The increasing demand for digital banking and payment services provides significant growth opportunities for Fiserv. It continues to expand its product portfolio through strategic acquisitions. The Merchant Acceptance segment benefits from Fiserv's SMB, Clover and Carat platforms.
The Zacks Consensus Estimate for Fiserv's 2023 earnings is pegged at $7.36 per share, indicating a 13.4% rise from the year-ago reported figure. The consensus mark for current-year revenues implies a 7% improvement from the year-ago actual. The consensus mark for 2023 earnings has been revised 0.5% north over the past 30 days. Its shares have advanced 26.8% in a year.
FLEETCOR Technologies: Based in Atlanta, GA, FLEETCOR Technologies is aided by solid organic revenue growth resulting from strength in its product categories, namely fuel, corporate payments and, tolls and lodging. Growing transaction volumes coupled with revenue retention and client acquisition efforts also act as tailwinds for the stock. Its widespread global presence enables FLT to enter new customer markets.
The Zacks Consensus Estimate for FLEETCOR Technologies' 2023 earnings is pegged at $17.06 per share, indicating a 6% rise from the year-ago reported figure. The consensus mark for current-year revenues hints at an 11.6% uptick from the year-ago actual. FLT's earnings beat estimates in each of the last four quarters, the average being 3.67%. Its shares have rallied 2.8% in a year.
WEX: Headquartered in Portland, ME, WEX is being aided by an extensive fuel network and service providers, improved transaction volumes, product excellence, marketing prowess, sales force productivity and other strategic revenue generation efforts. Customer retention rates remain strong, driven by well-performing private-label portfolios, and value-added product and service offerings. Acquisitions remain a key growth catalyst for WEX.
The Zacks Consensus Estimate for WEX's 2023 earnings is pegged at $14.04 per share, which indicates a rise of 3.8% from the 2022 figure. The consensus mark for current-year revenues suggests a 5.7% growth from the year-ago actual. WEX's earnings beat estimates in each of the last four quarters, the average being 5.36%. Its shares have gained 11.9% in a year.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.