Fidelity Scales New 52-Week High on Impressive Q2 Results

Zacks Equity Research
August 22, 2014

Shares of Fidelity National Information Services (FIS) achieved a new 52-week high of $57.64 on Aug 21, 2014 on upbeat second quarter results.

The closing price of Fidelity on the day was $57.32, representing a strong one-year return of 25.2% and a year-to-date return of 8.2%. The S&P 500 jumped 20.2% and 8.8% respectively during the same period.Average volume of shares traded over the last three months stands at approximately 1.129K.

Fidelity has delivered a positive earnings surprise of 18.3% over the past four quarters. This Zacks Rank #3 (Hold) stock has a market cap of $16.36 billion and a long-term expected earnings growth rate of 12%.

Key Growth Catalysts

Fidelity reported earnings of 75 cents in the second quarter, which increased 5.4% on a year-over-year basis and surpassed the Zacks Consensus Estimate by 11 cents attributable to robust revenue growth.

Revenues increased 5.7% from the year-ago quarter to $1.60 billion. This year-over-year revenue growth was primarily on account of strong performance from the International Solutions segment.

We believe that Fidelity’s commanding position in the financial services market, increasing international exposure, recurring revenue model, diversified product portfolio, cost synergies from acquisitions and a loyal customer base are major positives.

Moreover, the company continues to win contracts from banks and other financial institutions worldwide, which will further drive its market share. Additionally, we believe that increasing Europay, Mastercard and Visa (EM.V) adoption in the United States will drive Fidelity’s top line in 2014. In this regard, partnerships with Visa (V) and Mastercard (MA) are major tailwinds.

However, increasing consolidation within the banking sector, challenging environment for the Payments Solutions business and uncertain regulatory environment are the major headwinds. Also, intense competition from the likes of Fiserv (FISV) is a concern

Estimate Revision

The Zacks Consensus Estimate for fiscal 2014 increased a penny to $3 per share over the last 30 days. The earnings estimate for fiscal 2015 increased from 35 cents to 39 cents over the same period.

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