Fidelity (FIS) Up 1.9% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Fidelity National Information Services, Inc. (NYSE:FIS) . Shares have added about 1.9% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is FIS due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Fidelity Q4 Earnings Beat Estimates, Revenues Decline

Fidelity’s fourth-quarter 2017 adjusted earnings per share from continuing operations came in at $1.36, surpassing the Zacks Consensus Estimate of $1.34. Also, earnings improved 19.3% from the year-ago quarter figure of $1.14.

Fidelity’s results reflect lower expenses and expanding margin. However, decline in revenues was a headwind.

After considering the net tax benefit from tax legislation of $781 million or $2.32 per share and other adjustments, the company reported net earnings of $988 million or $2.93 in the quarter compared with $207 million or 63 cents in the prior-year quarter.

For full-year 2017, the company reported net earnings attributable to common shareholders of $1.32 billion or $3.93 per share that compares favorably with $568 million or $1.72 per share in the prior year.

Revenues and Expenses Decline

For 2017, the company reported GAAP revenues of $9.12 billion, down 1.3% on a year-over-year basis.

GAAP revenues for the quarter came in at $2.33 billion, which declined 4.7% year over year and lagged the Zacks Consensus Estimate of $2.37 billion.

Organic revenue growth was 3.1% in the quarter.

Selling, general and administrative expenses came in at $340 million, down 26.1% year over year.

Segment wise, Integrated Financial Solutions’ GAAP revenues grew 4.6% year over year to $1.2 billion while revenues from Global Financial Solutions declined 8.5% to $1.05 billion. Corporate/Other revenues decreased 46.5% to $83 million.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) rose nearly 4.1% year over year to $881 million while adjusted EBITDA margin expanded 340 basis points to 37.8%.

Balance Sheet & Cash Flow

As of Dec 31, 2017, cash and cash equivalents were $665 million compared with $683 million as of Dec 31, 2016. Debt outstanding was nearly $8.8 billion.

In the quarter, net cash provided by operations was $662 million and free cash flow was $551 million.

Fidelity paid dividends worth $96 million in the quarter and $385 million in 2017.

Guidance for 2018

Fidelity expects organic revenue growth to be in the range of 2.5-3.5% while GAAP revenue growth is expected to decline 1.5-2.5%.

Adjusted earnings per share are expected to be in the band of $5.10-$5.30.

Adjusted EBITDA margin is expected in the range of 36-37%.

Management expects adjusted depreciation and amortization to be in the range of $660-$680 million.

Net interest expenses are expected to come in about $280 million in 2018.

Full-year 2018 effective tax rate is anticipated to be about 20%.

Management expects net minority interest to be about $27 million.

Capital expenditures of about 7% of revenues are likely to be made in 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter.

Fidelity National Information Services, Inc. Price and Consensus

Fidelity National Information Services, Inc. Price and Consensus | Fidelity National Information Services, Inc. Quote

VGM Scores

Currently, FIS has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise that FIS has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.