Fidelity National (FIS) Up 10.5% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Fidelity National Information Services (FIS). Shares have added about 10.5% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Fidelity National due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Fidelity National Q1 Earnings Beat Estimates, Revenues Rise Y/Y

Fidelity’s first-quarter 2020 adjusted earnings per share from continuing operations were $1.28, surpassing the Zacks Consensus Estimate by a penny. Also, the bottom line compared favorably with the year-ago quarter figure of $1.16.

Organic revenue growth and expanding margin were the key tailwinds. Also, strong liquidity position aided. However, a significant rise in expenses posed a key concern.

On a GAAP basis, the company reported net earnings attributable to common stockholders of $15 million or 2 cents per share compared with $148 million or 45 cents in the prior-year quarter.

Organic Revenues Increase, Expenses Flare Up

GAAP revenues in the quarter were $3.08 billion, up 50% year over year. The figure met the Zacks Consensus Estimate.

Organic revenues went up nearly 2% in the quarter.

Selling, general and administrative expenses were $881 million, up significantly year over year.

Segment wise, Merchant Solutions’ GAAP revenues grew to $935 million from $50 million in the year-ago quarter. Revenues from Banking Solutions rose 6% to $1.46 million. Capital Market Solutions’ revenues climbed 10% to $631 million.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) increased to $1.25 billion from $729 million in the year-ago quarter. Adjusted EBITDA margin expanded 510 basis points to 40.5%.

Balance Sheet & Cash Flow

As of Mar 31, 2020, cash and cash equivalents were $1.37 billion compared with $1.15 billion as of Dec 31, 2019. Debt outstanding was $20.4 billion.

In the first quarter, net cash provided by operations was $383 million and free cash flow nearly doubled from the prior-year quarter to $539 million.

The company paid out dividends worth $216 million in the reported quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -13.67% due to these changes.

VGM Scores

Currently, Fidelity National has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Fidelity National has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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