Fidelity (FIS) Q4 Earnings Beat Estimates, Expenses Fall

Fidelity National Information Services’ FIS fourth-quarter 2020 adjusted earnings per share from continuing operations were $1.62, surpassing the Zacks Consensus Estimate of $1.56. Also, the bottom line compared favorably with the year-ago quarter figure of $1.57.

Strong liquidity position and expanding margin were the key tailwinds. Also, decline in expenses was a positive. However, flat organic revenues posed a key concern.

On a GAAP basis, the company reported net earnings attributable to common stockholders of $103 million or 16 cents per share against net loss of $158 million or 26 cents per share in the prior-year quarter.

In 2020, Fidelity reported earnings (on a GAAP basis) of 25 cents, down from 66 cents in prior year. Also, net earnings declined to $158 million from $298 million in 2019.

Organic Revenues Stable, Expenses Decline

In 2020, the company reported revenues of $12.6 billion, which matched the consensus estimate. Also, it increased 21% from the previous year.

GAAP revenues in the quarter were $3.32 billion, down 1% year over year. The downside was mainly due to negative consumer spending trends associated with the pandemic. Also, the figure slightly lagged the Zacks Consensus Estimate of $3.33 billion.

Organic revenues remained stable in the quarter, primarily due to reduced consumer spending trends caused by impact of the COVID-19 pandemic.

Selling, general and administrative expenses were $903 million, down 26.7% from $1.23 billion in the year-ago quarter.

Segment wise, Merchant Solutions’ GAAP revenues declined 8% to $1 billion. Revenues from Banking Solutions rose 5% to $1.55 million. Capital Market Solutions’ revenues jumped 6% to $663 million.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) increased to $1.5 billion from $1.49 billion in the year-ago quarter. Adjusted EBITDA margin expanded 60 basis points to 45.2%.

Balance Sheet & Cash Flow

As of Dec 31, 2020, cash and cash equivalents were $1.96 billion compared with $1.15 billion as of Dec 31, 2019. Debt outstanding was $20 billion.

In the fourth quarter, net cash provided by operations was $1.42 billion, and the company reported free cash flow of $977 million.

The company paid out dividends worth $218 million in the reported quarter.

2021 Guidance

First Quarter

Fidelity expects GAAP revenues to be between $3.13 billion and $3.16 billion. The company expects to report net loss between 20 cents per share and 5 cents. Adjusted earnings per share are expected to be in the band of $1.20-$1.25.

Full Year

For 2021, GAAP revenues are projected to be between $13.5 billion and $13.7 billion. The company expects to report net earnings of $1.50 per share to $1.95. Adjusted earnings per share are expected to be in the band of $6.20-$6.40.

Our Viewpoint

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 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

Fidelity currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Companies

New York Community Bancorp, Inc. NYCB posted fourth-quarter 2020 earnings per share of 27 cents, inching past the Zacks Consensus Estimate of 26 cents. The figure also compares favorably with the prior-year quarter figure of 20 cents, up 35%.

East West Bancorp’s EWBC fourth-quarter 2020 earnings per share of $1.15 outpaced the Zacks Consensus Estimate of $1.03. However, the figure is down 10.9% from the prior-year quarter. Results included adjustments related to DC Solar tax credit investments.

Cullen/Frost Bankers, Inc. CFR reported fourth-quarter 2020 earnings per share of $1.38, which handily surpassed the Zacks Consensus Estimate of $1.30. However, it compared unfavorably with the prior-year quarter figure of $1.60 per share.

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