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Why Is Fiserv (FISV) Up 4.6% Since Last Earnings Report?

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A month has gone by since the last earnings report for Fiserv (FISV). Shares have added about 4.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Fiserv 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 drivers.

Fiserv Beats Q2 Earnings & Revenue Estimates

Fiserv reported solid second-quarter 2021 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings per share of $1.37 beat the consensus mark by 6.2% and increased 47.3% year over year. Adjusted revenues of $3.86 billion beat the consensus estimate by 3.8% and increased year over year.

Internal revenue growth was 18% in the reported quarter, led by 41% growth in the Acceptance segment, 5% growth in the Fintech segment and 7% growth in the Payments segment.

Revenues in Detail

Revenues at the Merchant Acceptance segment came in at $1.67 billion, up 36.2% year over year. Adjusted revenues of $1.67 billion grew 42.8% year over year.

Revenues at the Payments and Network segment increased 7.7% year over year to $1.42 billion. Adjusted revenues of $1.43 billion grew 7.4% year over year.

Revenues at the Financial Technology segment increased 5.6% year over year to $754 million.

Revenues at Total processing and services segment increased 16.3% year over year to $3.36 billion while product revenues grew 20% year over year to $690 million.

Operating Results

Adjusted operating income of $1.31 billion was up 41.2% from the year-ago quarter. Adjusted operating margin of 33.9% grew 510 basis points (bps) year over year.

Adjusted operating income at the Merchant Acceptance segment was $524 million, up more than 100% year over year. Adjusted operating margin grew to 31.4% from 19.1% in the year-ago quarter.

Adjusted operating loss at the Payments and Network segment was $124 million compared with a loss of $106 million in the year-ago quarter.

Operating income at the Financial Technology segment totaled $273 million, up 8.3% year over year. Operating margin of 36.2% improved 80 bps.

Balance Sheet and Cash Flow

Fiserv exited second-quarter 2021 with cash and cash equivalents of $841 million compared with $831 million at the end of the prior quarter. Long-term debt was $20.4 billion compared with $20.8 billion at the end of the prior quarter.

The company generated $1.06 million of net cash from operating activities in the reported quarter. Free cash flow was $897 million. Capital expenditures were $260 million.

The company repurchased 5 million shares for $588 million in the reported quarter.

2021 Guidance

Fiserv has raised the lower end of its outlook for 2021. The company now expects internal revenue growth of 10% to 12% compared with the prior guidance of 9% to 12%.

Adjusted earnings per share are now anticipated in the range of $5.50 to $5.60 compared with the prior guidance of $5.35 and $5.50. 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, Fiserv has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, Fiserv has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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