Yahoo Finance Is Fidelity (FIS) Stock Worth Buying Ahead of Q1 Earnings?
Fidelity National Information Services, Inc. FIS shares have shown impressive performance compared to its peers this year. With 13% growth year to date, it has surpassed the industry's 4.4% rise and the S&P 500 Index's 7.7% gain. This reflects investor confidence in its growth strategies, operational efficiency and efforts to enhance shareholder value.
The divestment of its 55% stake in Worldpay earlier this year underscores management's skill in executing profit-enhancing initiatives and focusing on core operations. Management aims to return a minimum of roughly $4 billion to its shareholders through share buybacks by the end of 2024 and achieve a dividend payout ratio of 35%.
Fidelity’s diverse customer base, along with high recurring revenues and core business resilience, will sustain the company's revenue growth. Moreover, it strategically invests in technology and innovation across high-growth markets, broadening its total addressable market. As the reliance on smartphones and tablets grows worldwide, its innovative solutions, like mobile wallets, are witnessing high demand from financial institutions, positioning it favorably in a competitive landscape.
Shares appeared to resonate with Fidelity’s growth efforts. Add a potential earnings beat for the first quarter to that mix, and you have a company that is poised for another bull run. It is scheduled to report first-quarter 2024 results on May 6, 2024, after the closing bell.
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Q1 Beat in the Cards
The Zacks Consensus Estimate for first-quarter earnings per share from continuing operations of 96 cents suggests a more than 33% increase from the prior-year period. The consensus mark has remained stable over the past week. It beat estimates in two of the trailing four quarters and missed twice. Also, the consensus estimate for first-quarter revenues from continuing operations of $2.5 billion indicates a 2.2% year-over-year increase.
Our proven model predicts a likely earnings beat for the company this time around. FIS has an Earnings ESP of +10.79% as the Most Accurate Estimate of $1.06 per share is currently pegged higher than the Zacks Consensus Estimate of 96 cents. Also, it currently has a Zacks Rank #2 (Buy). The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) increases the chances of an earnings beat, which is precisely the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Some Risk Factors to Consider
Along with the upsides, investors should keep in mind that the company had a high long-term debt of $13 billion and a limited cash level of $440 million at 2023-end. Its net debt-to-capital ratio of 43.3% is well above the industry average of 18.7%. The high leverage will likely increase its interest expenses.
Also, the ongoing consolidation in the banking and financial services sector could potentially hamper FIS' revenue growth. This could occur through the loss of existing customers, especially in cases where FIS provides multiple services to both entities.
Nevertheless, we believe that its systematic and strategic plan of action will continue driving growth. Also, its forward 12-month price-to-earnings ratio of 14X, notably below the industry average of 22.2X, suggests that the stock is attractively priced for investors.
Bottom Line
FIS is, without a doubt, one of the major global financial technology companies to buy in the market now. With the potential for an earnings beat, robust long-term growth prospects and an appealing valuation, FIS presents a lucrative opportunity for investors.
How Did Other Financial Stocks Fared?
Here are some companies from the broader Business Services space that have already reported earnings this season.
Visa Inc. V reported strong second-quarter fiscal 2024 results, which benefited from expanding payments volume, cross-border volume and processed transactions. Its earnings per share of $2.51 outpaced the Zacks Consensus Estimate of $2.43 by 3.3%. The bottom line rose 20% year over year.
Despite challenges, such as a high interest rate environment, more than average inflation level and concerns about the economic slowdown, resilient consumer spending and strong e-commerce trends supported Visa's performance. However, higher operating expenses and client incentives partially tempered the upside.
The Western Union Company WU posted robust first-quarter 2024 results, driven by the Branded Digital business' resilience, growth in transactions, solid Consumer Money Transfer business performance and stabilization of the retail business. However, increased expenses tempered some of the gains.
It announced first-quarter 2024 adjusted earnings per share of 45 cents, which beat the Zacks Consensus Estimate by 12.5%. Western Union’s bottom line rose nearly 5% year over year.
FirstCash Holdings, Inc. FCFS reported adjusted earnings of $1.55 per share, beating the consensus mark by 3.3%. Over the last four quarters, it beat earnings estimates each time, with an average surprise of 8.1%.
FCFS posted revenues of $836.4 million in the reported quarter, while the total profit level reached $61.4 million. The Zacks Consensus Estimate for earnings for the next quarter suggests 2.6% year-over-year growth.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Visa Inc. (V) : Free Stock Analysis Report
Fidelity National Information Services, Inc. (FIS) : Free Stock Analysis Report
The Western Union Company (WU) : Free Stock Analysis Report
FirstCash Holdings, Inc. (FCFS) : Free Stock Analysis Report
