Fidelity (FIS) Q2 Earnings Beat Estimates, Revenues Rise Y/Y

Fidelity National Information Services, Inc. FIS reported second-quarter 2022 adjusted earnings per share (EPS) of $1.73, surpassing the Zacks Consensus Estimate of $1.70. The bottom line also compared favorably with the year-ago quarter’s figure of $1.61.

Second-quarter 2022 revenues were $3,719 million, up 7% year over year. Moreover, the top line beat the Zacks Consensus Estimate of $3,661 million. Organic revenue growth was recorded at 8% in the quarter.

The strong second-quarter results were supported by strong performance across all segments. Large client wins and new sales momentum were some of the major positives in the second quarter, despite facing an uncertain macro environment.

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

Q2 Performance

Cost of revenues was at $2,234 million in the second quarter, up from $2,135 million a year ago. Selling, general and administrative expenses increased to $1,082 million from the year-ago figure of $977 million.

Adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) increased 5% to $1,599 million from the year-ago quarter’s level. The adjusted EBITDA margin declined 70 basis points (bps) to 43%.

On a GAAP basis, second-quarter net earnings attributable to common shareholders stood at $277 million or 45 cents per share compared with $341 million or 55 cents per share in the prior-year quarter.

Segments

Merchant Solutions’ revenues climbed 11% year over year to $1,302 million and beat the Zacks Consensus Estimate of $1,267 million. Organic revenue growth was at 8%. Adjusted EBITDA margin fell 280 bps to 47.1%, due to multiple causes like the Russia/Ukraine conflict, investing for geographic expansion and other causes. It missed the consensus mark of 50%.

Revenues from Banking Solutions rose 5% year over year to $1,663 million. The reported figure also beat the consensus mark of $1,653.5 million. Organic revenue growth was recorded at 6%. The segment was aided by large client wins. Adjusted EBITDA margin reduced by 130 bps year over year to 44.3%, due to ongoing wage inflation. Yet, the figure beat the Zacks Consensus Estimate of 44%.

Capital Market Solutions’ revenues jumped 5% from the prior-year period to $663 million and beat the Zacks Consensus Estimate of $662.2 million, thanks to solid new sales momentum. Organic revenue growth was at 7%. Adjusted EBITDA margin rose 140 bps year over year to 47.8%, on expense management and continued operating leverage. It marginally beat the consensus mark of 47.4%.

Corporate and Other segment’s revenues inched up 1% year over year to $91 million and beat the consensus mark of $75.4 million.

Balance Sheet & Cash Flow

As of Jun 30, 2022, cash and cash equivalents were $1,688 million, down from $2,010 million as of Dec 31, 2021. Total assets were at $79,620 million compared with $82,931 million at 2021-end.

Long-term debt, excluding the current portion, was at $11,755 million at the second-quarter end, down from $14,825 million at 2021-end. Current portion of long-term debt was at $3,148 million while short-term borrowings were at $3,642 million.

In the first half of 2022, net cash provided by operations was $1,920 million, up from $1,864 million a year ago. Fidelity reported a free cash flow of $806 million in the second quarter, down from $1,005 million a year ago.

Capital Deployment

The company repurchased shares worth $300 million in the second quarter of 2022. Overall, FIS returned around $600 million in the quarter under review to the shareholders.

Guidance

In the third quarter, FIS is expected to report GAAP revenues in the range of $3,580-$3,635 million, with adjusted EPS of $1.74-$1.78. Further, for the full year of 2022, GAAP revenues are expected at $14,615-$14,700 million, while adjusted EPS will be within $7-$7.10.

Fidelity expects to primarily utilize free cash flow through the end of 2023 to return capital to shareholders. Earlier, the company expected to repurchase shares worth $3 billion this year, with weightage towards the second half.

Zacks Rank & Key Picks

Fidelity currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Business Services space are Mastercard Incorporated MA, Visa Inc. V and Paychex, Inc. PAYX, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Headquartered in Purchase, NY, Mastercard is a leading global payment solutions company. MA beat earnings estimates in each of the past four quarters, with the average surprise being 12.9%.

Based in San Francisco, CA, Visa is a massive global payments technology company. The Zacks Consensus Estimate for Visa’s 2022 earnings indicates 24.7% year-over-year growth.

Rochester, NY-based Paychex is one of the leading providers of integrated human capital management solutions. The Zacks Consensus Estimate for PAYX’s 2022 bottom line indicates 9.8% year-over-year growth.

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