It has been about a month since the last earnings report for Fiserv (FISV). Shares have lost about 1.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Fiserv due for a breakout? 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.
Fiserv Misses Q2 Earnings & Revenue Estimates
Fiserv reported disappointing second-quarter 2020 results, wherein earnings and revenues missed the Zacks Consensus Estimate.
Adjusted earnings per share of 93 cents fell below the consensus mark by a penny. Adjusted revenues of $3.22 billion missed the consensus estimate by 1.8%.
Internal revenues declined 7% in the reported quarter, with declines of 15% in the Merchant Acceptance segment, 1% in the Financial Technology segment and 3% in the Payments and Network segment.
Revenues in Detail
Revenues at the Merchant Acceptance segment came in at $1.22 billion. Adjusted revenues of $1.17 billion fell 20.4% year over year.
Revenues at the Payments and Network segment increased 99% year over year to $1.32 billion. Adjusted revenues of $1.33 billion declined 4.5% year over year.
Revenues at the Financial Technology segment decreased 2.3% year over year to $714 million.
Revenues at Total processing and services segment increased more than 100% year over year to $2.89 billion while product revenues grew more than 100% year over year to $575 million.
Adjusted operating income of $927 million was down 14.4% from the year-ago quarter. Adjusted operating margin of 28.8% fell 90 basis points (bps) year over year.
Adjusted operating income at the Merchant Acceptance segment was $223 million, down 46.9% year over year. Adjusted operating margin declined 950 bps year over year to 19.1%.
Adjusted operating income at the Payments and Network segment was $558 million, up 0.5% year over year. Adjusted operating margin improved 220 bps year over year to 42.8%.
Operating income at the Financial Technology segment totaled $252 million, up 14% year over year. Operating margin of 35.4% improved 520 bps.
Balance Sheet and Cash Flow
Fiserv exited second-quarter 2020 with cash and cash equivalents of $869 million compared with $896 million at the end of the prior quarter. Long-term debt was $21.5 billion compared with $21.6 billion at the end of the prior quarter.
The company generated $1.03 billion of net cash from operating activities in the reported quarter. Free cash flow was $895 million. Capital expenditures were $242 million. Fiserv repurchased 5.7 million shares for $550 million in the reported quarter.
Fiserv expects full-year 2020 adjusted earnings per share to register nearly 10% growth.
The company is hopeful of delivering its 35th consecutive year of double-digit adjusted earnings per share growth in 2020 and remains well-positioned for 2021, considering strength of the results to date and improvement in performance trends across the globe.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
At this time, Fiserv has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
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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