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Will Fidelity National's (FIS) Q2 Profits Surge or Stall?
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Fidelity National Information Services, Inc. (FIS - Free Report) is set to report its second-quarter 2024 results on Aug 6, before the opening bell.
The Zacks Consensus Estimate for second-quarter earnings is currently pegged at $1.23 per share, implying a decline of 20.7% from the year-ago reported number. The estimate remained stable over the past month. The Zacks Consensus Estimate for second-quarter revenues is currently pegged at almost $2.5 billion, suggesting a 33.6% fall from the year-ago actuals.
Image Source: Zacks Investment Research
Fidelity National beat the consensus estimate for earnings in two of the trailing four quarters and missed twice, with the average surprise being negative 5.7%, as you can see below.
Fidelity National Information Services, Inc. Price and EPS Surprise
Our proven model does not conclusively predict an earnings beat for Fidelity National this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate currently stands at $1.23 per share, in line with the Zacks Consensus Estimate.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Now, let’s see how things have shaped up before the second-quarter earnings announcement.
Q2 Key Predictions
Fidelity National's second-quarter performance is poised to capitalize on the global digital transformation trend and growing transactions. Its strategic investments in mobile banking and expanded product offerings align with evolving consumer preferences, enhancing financial results.
The Zacks Consensus Estimate for revenues from the Banking Solutions segment indicates 2.4% year-over-year growth, whereas our model estimate suggests a 2.3% increase. The Zacks Consensus Estimate for the segment’s adjusted EBITDA signals a nearly 3% increase from the year-ago quarter’s reported figure, whereas our model predicts a 4.5% increase.
Its long-established relationships with financial and commercial institutions help it to generate recurring revenues. The Zacks Consensus Estimate and our model estimate for revenues from the Capital Market Solutions segment suggest more than 7% year-over-year growth.
The consensus mark for Capital Market Solutions’ adjusted EBITDA signals a 5.6% increase from the year-ago figure, whereas we expect it to grow 4.1%. The company’s investments in technology and innovation across high-growth markets are anticipated to have helped expand its total addressable market in the quarter under review. However, expenses are likely to have risen due to the investments.
The company is expected to have witnessed increased expenses related to improvement works in platforms and applications, as well as some inflationary pressures. Our estimate for cost of revenues is pegged at $1.55 billion, indicating 2% year-over-year growth. This is likely to have reduced the profit margins in the to-be-reported quarter, making an earnings beat uncertain.
Also, the divestment of Worldpay Merchant Solutions business is likely to have affected some figures in the quarter under review. Considering its geographical presence, the consensus mark for North America second-quarter revenues is pegged at $1.9 billion, while the same for Other regions’ is pegged at $574.2 million.
Price Performance
Fidelity National's stock has rallied 27.9% year to date, outperforming the industry’s growth of 5.3% and the S&P 500 Index’s 16% gain. In comparison, its peer Mastercard Incorporated (MA - Free Report) increased 8.7%, whileThe Western Union Company (WU - Free Report) lost 0.2% during the same period.
YTD Price Performance
Image Source: Zacks Investment Research
What Should Investors Do Now?
Given Fidelity National's digital transformation efforts, high recurring revenues, and shareholder-friendly initiatives, current investors may consider holding onto the stock and closely monitoring the upcoming earnings results. While these factors support a positive long-term outlook, the company faces significant challenges, including increasing competition, an anticipated decline in profits, a high debt level, and a potential softening in consumer spending. These headwinds suggest that new investors might want to wait and observe how the company navigates these challenges before making any investment decisions.
Image: Bigstock
Will Fidelity National's (FIS) Q2 Profits Surge or Stall?
Fidelity National Information Services, Inc. (FIS - Free Report) is set to report its second-quarter 2024 results on Aug 6, before the opening bell.
The Zacks Consensus Estimate for second-quarter earnings is currently pegged at $1.23 per share, implying a decline of 20.7% from the year-ago reported number. The estimate remained stable over the past month. The Zacks Consensus Estimate for second-quarter revenues is currently pegged at almost $2.5 billion, suggesting a 33.6% fall from the year-ago actuals.
Fidelity National beat the consensus estimate for earnings in two of the trailing four quarters and missed twice, with the average surprise being negative 5.7%, as you can see below.
Fidelity National Information Services, Inc. Price and EPS Surprise
Fidelity National Information Services, Inc. price-eps-surprise | Fidelity National Information Services, Inc. Quote
Q2 Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Fidelity National this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate currently stands at $1.23 per share, in line with the Zacks Consensus Estimate.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Fidelity National currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Now, let’s see how things have shaped up before the second-quarter earnings announcement.
Q2 Key Predictions
Fidelity National's second-quarter performance is poised to capitalize on the global digital transformation trend and growing transactions. Its strategic investments in mobile banking and expanded product offerings align with evolving consumer preferences, enhancing financial results.
The Zacks Consensus Estimate for revenues from the Banking Solutions segment indicates 2.4% year-over-year growth, whereas our model estimate suggests a 2.3% increase. The Zacks Consensus Estimate for the segment’s adjusted EBITDA signals a nearly 3% increase from the year-ago quarter’s reported figure, whereas our model predicts a 4.5% increase.
Its long-established relationships with financial and commercial institutions help it to generate recurring revenues. The Zacks Consensus Estimate and our model estimate for revenues from the Capital Market Solutions segment suggest more than 7% year-over-year growth.
The consensus mark for Capital Market Solutions’ adjusted EBITDA signals a 5.6% increase from the year-ago figure, whereas we expect it to grow 4.1%. The company’s investments in technology and innovation across high-growth markets are anticipated to have helped expand its total addressable market in the quarter under review. However, expenses are likely to have risen due to the investments.
The company is expected to have witnessed increased expenses related to improvement works in platforms and applications, as well as some inflationary pressures. Our estimate for cost of revenues is pegged at $1.55 billion, indicating 2% year-over-year growth. This is likely to have reduced the profit margins in the to-be-reported quarter, making an earnings beat uncertain.
Also, the divestment of Worldpay Merchant Solutions business is likely to have affected some figures in the quarter under review. Considering its geographical presence, the consensus mark for North America second-quarter revenues is pegged at $1.9 billion, while the same for Other regions’ is pegged at $574.2 million.
Price Performance
Fidelity National's stock has rallied 27.9% year to date, outperforming the industry’s growth of 5.3% and the S&P 500 Index’s 16% gain. In comparison, its peer Mastercard Incorporated (MA - Free Report) increased 8.7%, whileThe Western Union Company (WU - Free Report) lost 0.2% during the same period.
YTD Price Performance
Image Source: Zacks Investment Research
What Should Investors Do Now?
Given Fidelity National's digital transformation efforts, high recurring revenues, and shareholder-friendly initiatives, current investors may consider holding onto the stock and closely monitoring the upcoming earnings results. While these factors support a positive long-term outlook, the company faces significant challenges, including increasing competition, an anticipated decline in profits, a high debt level, and a potential softening in consumer spending. These headwinds suggest that new investors might want to wait and observe how the company navigates these challenges before making any investment decisions.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.