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Fidelity (FIS) Q4 Earnings Beat Estimates, Revenues Rise Y/Y

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Fidelity National Information Services, Inc. FIS reported fourth-quarter 2021 adjusted earnings per share (EPS) of $1.92, surpassing the Zacks Consensus Estimate of $1.89. Also, the bottom line compared favorably with the year-ago quarter’s figure of $1.62.

Notable increases in margin and organic revenue growth were positives. Continued recovery in the global economy from the ongoing pandemic also supported the performance. Despite achieving annual run-rate revenue synergies and operational expense synergies of around $750 million and $900 million, respectively, a rise in selling, general and administrative expenses was a hurdle.

On a GAAP basis, fourth-quarter net earnings attributable to common stockholders stood at $291 million or 48 cents per share, up substantially from $103 million or 17 cents in the prior-year quarter.

On a GAAP basis, 2021 net earnings, attributable to common stockholders, of $417 million or 68 cents per share, were up substantially from $158 million or 26 cents in the prior year.

Organic Revenues Rise, Expenses Increase

Fourth-quarter 2021 revenues were $3.67 billion, up 10.7% year over year. Moreover, the top line marginally lagged the Zacks Consensus Estimate of $3.70 billion. Organic revenues increased 11% in the quarter on higher growth across three operating segments.

Revenues for 2021 increased 11% from the prior-year level to $13.9 billion, reflecting strong growth by Fidelity’s operating segments.

Segment-wise, Merchant Solutions’ revenues climbed 19% to $1.19 billion. Revenues from Banking Solutions rose 8% to $1.67 million. Capital Market Solutions’ revenues jumped 8% to $716 million, while Corporate and Other segment’s revenues declined 3% to $96 million.

Selling, general and administrative expenses were $966 million, up 7% year over year.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) increased 14% to $1.71 billion from the year-ago quarter’s level. The adjusted EBITDA margin expanded 120 basis points to 46.4%.

Balance Sheet & Cash Flow

As of Dec 31, 2021, cash and cash equivalents were $2.01 billion compared with $1.96 billion as of Dec 31, 2020. The debt outstanding was $20.4 billion.

In the fourth quarter, net cash provided by operations was $961 million. FIS reported a free cash flow of $845 million.

It paid out dividends worth $237 million in the reported quarter.

Guidance

Management expects first-quarter 2022 GAAP revenues between $3.42 billion and $3.45 billion. 2022 GAAP revenues are expected between $14.78 billion and $14.93 billion.

Fidelity envisions first-quarter 2022 EPS (GAAP basis) in the range of 15-25 cents. First-quarter 2022 adjusted EPS is projected to be $1.44-$1.47.

FIS expects 2022 EPS (GAAP basis) to be $2.10-$2.50 range, while 2022 adjusted EPS is predicted to be $7.25-$7.37.

Consistent with its capital allocation strategy, FIS intends to increase its annual dividend nearly 20% per year, beginning with the quarterly dividend payable in March 2022. By accelerating its target annual dividend growth rate to approximately 20% from approximately 10% previously, Fidelity plans to gradually boost its dividend payout ratio over several years to nearly 35% of adjusted net earnings from nearly 25% in 2021.

Our Viewpoint

Fidelity’s impressive fourth-quarter results were supported by higher revenue growth across all three operating segments. FIS remains well-poised for growth, backed by its attractive core business, with many ongoing initiatives and a broad customer base.

With strong cash flows, Fidelity’s capital allocation strategy is likely to be sustainable. Also, higher investments in mobile banking and innovative products are expected to support its growth over the long term.

Fidelity National Information Services, Inc. Price and EPS Surprise

Fidelity National Information Services, Inc. Price and EPS Surprise
Fidelity National Information Services, Inc. Price and EPS Surprise

Fidelity National Information Services, Inc. price-eps-surprise | Fidelity National Information Services, Inc. Quote

Fidelity currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Companies

Charles Schwab’s SCHW fourth-quarter 2021 adjusted earnings of 86 cents per share missed the Zacks Consensus Estimate of 88 cents. The bottom line, however, grew 16% from the prior-year quarter’s figure.

Schwab’s results reflected solid client asset balances and a rise in new brokerage accounts. These were driven by a solid client activity, which supported revenues in the quarter. A slight dip in operating expenses was a tailwind. However, fee waivers and lower interest rates were a drag for SCHW.

Interactive Brokers Group’s IBKR fourth-quarter 2021 adjusted earnings per share of 83 cents surpassed the Zacks Consensus Estimate of 82 cents. The bottom line reflects growth of 20.3% from the prior-year quarter’s figure.

Interactive Brokers recorded a marginal rise in revenues in the quarter under review. An increase in daily average revenue trades further aided results. IBKR’s capital position also remained strong. However, higher expenses hurt results to some extent.

Morgan Stanley’s MS fourth-quarter 2021 adjusted earnings of $2.08 per share outpaced the Zacks Consensus Estimate of $2.00. The bottom line reflects a rise of 8% from the year-ago quarter’s level.

Morgan Stanley’s trading business did not perform significantly well. However, performance of its investment banking business was strong. Higher net interest income, mainly driven by a rise in total loan balance and a plunge in interest expenses, supported Morgan Stanley’s top line. Mounting operating expenses hurt MS’ results to some extent.


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