Fidelity National Information Services, Inc. FIS is set to release third-quarter 2015 earnings results on Nov 3. In the last quarter, the company reported positive earnings surprise of 4.23%. The company delivered positive earnings surprises in three of the last four quarters, with an average positive earnings surprise of 1.65%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Fidelity has strengthened its dominant position in the financial and payments solutions business, primarily based on its superior product portfolio. We believe that enhanced operating efficiency is the primary reason for the company’s ever-growing banking and financial services clientele.
The company’s low-cost platform has emerged as a savior for banks and financial institutions, which were plagued by increased consolidation, tightened regulations, lower interest rates and liquidity crunch. We expect Fidelity to witness strong organic revenue growth over the long term, based on the company’s broad and diverse customer base, high recurring revenues from processing and maintenance (approximately 80% of revenues), and continued technology upgrades.
We also believe that Fidelity is well positioned to benefit from increasing investment in mobile banking and innovative products such as PayNet. Also, accretive acquisitions have played an important role. The acquisitions such as Metavante and Capco not only expanded its product and solutions portfolio but also provided significant synergies that drove top and bottom-line growth. Acquisitions and partnerships have enabled Fidelity to expand its offshore presence. The company expects international markets to be its fastest growing revenue segment.
However, increasing consolidation in the banking sector, a challenging environment for the Payments Solutions business, stiff competition and an uncertain regulatory environment are the headwinds.
Earnings Whispers?
Our proven model does not conclusively show that Fidelity National is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: Its Earnings ESP is -2.20%. This is because the Most Accurate estimate stands at 89 cents while the Zacks Consensus Estimate is pegged higher at 91 cents per share.
Zacks Rank: Fidelity National carries a Zacks Rank #3 (Hold), increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here is are a few stocks you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Facebook, Inc. FB, with an Earnings ESP of +5.71% and a Zacks Rank #1 (Strong Buy).
Agilent Technologies Inc. A, with an Earnings ESP of +2.13% and a Zacks Rank #2 (Buy).
Nexstar Broadcasting Group, Inc. NXST, with an Earnings ESP of +14.29% and a Zacks Rank #2.
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