On Thursday, Baird maintained its positive stance on Fiserv shares (NYSE: FI) with an Outperform rating and a $200.00 price target. The firm's update follows an 8-K filing by Fiserv, which detailed the upcoming expiration of its joint venture with Wells Fargo on April 1, 2025. Fiserv anticipates a non-cash impairment charge likely between $400 million and $600 million to be recorded in the third quarter of this year, in line with GAAP principles.
Despite the impending conclusion of the joint venture, Fiserv has reassured that this development will not affect its adjusted earnings per share (EPS) for 2024. The company also stated that its medium-term performance outlook remains unchanged, with expectations of 9-12% organic revenue growth and an adjusted EPS increase of 14-18% for the years 2025 and 2026.
In addition to the joint venture update, Fiserv has entered into a multiyear agreement to continue providing processing services for Wells Fargo's current and future merchant customers. This agreement ensures that Fiserv will maintain its relationship with Wells Fargo beyond the lifespan of their joint venture.
The non-cash impairment charge that Fiserv expects to record is a standard accounting practice to reflect the reduced value of the joint venture asset as it nears the end of its term. Fiserv's forward-looking statements about its financial outlook indicate confidence in the company's ability to grow despite the cessation of the joint venture.
Fiserv's ongoing commitment to providing processing solutions to Wells Fargo merchants after the joint venture's expiration further emphasizes the company's strategic efforts to sustain and build upon its existing client relationships.
In other recent news, Fiserv Inc (NYSE:FI). anticipates a substantial non-cash impairment charge of between $400 million and $600 million in the third quarter of 2024, related to its equity investment in Wells Fargo Merchant Services. This is due to the upcoming expiration of the joint venture with Wells Fargo Bank. Despite this, Fiserv assures no material cash expenditures will stem from this charge. The company also maintains its medium-term performance outlook for 2025 and 2026, projecting organic revenue growth of 9-12% and adjusted earnings per share growth of 14-18%.
Fiserv reported a 7% year-over-year increase in second-quarter 2024 revenue, reaching a record $5.11 billion, and a 31% increase in second-quarter earnings. The company also completed a public offering and issuance of senior notes totaling $1.75 billion. Analysts from Mizuho Securities and BTIG have responded favorably to these developments, both maintaining positive ratings on Fiserv.
Furthermore, Fiserv expanded its partnership with PayPal (NASDAQ:PYPL) Holdings, Inc. to enhance the checkout process for U.S. merchants. The company continues to focus on software and value-added services up-selling, targeting the restaurant industry.
InvestingPro Insights
As Fiserv (NYSE: FI) navigates the end of its joint venture with Wells Fargo and projects steady growth, real-time data from InvestingPro offers additional context for investors considering the company's prospects. With a market capitalization of $101.73 billion, Fiserv is recognized as a significant force in the Financial Services industry. The company has demonstrated a strong return over the last year, with a 54.33% total return, and is currently trading close to its 52-week high, at 98.48% of that level. This aligns with the positive outlook shared by Baird.
InvestingPro Tips highlight Fiserv's profitability, noting that analysts predict the company will be profitable this year, a trend supported by the company's performance over the last twelve months. Moreover, Fiserv's PEG Ratio of 0.65 suggests that its stock is trading at a reasonable price relative to its earnings growth potential. This financial metric, along with a robust gross profit margin of 60.96%, may reassure investors about the company's ability to generate earnings efficiently.
For those seeking a deeper dive into Fiserv's financial health and future potential, InvestingPro provides additional tips, available at their dedicated page for Fiserv. With insights into metrics such as P/E ratio, revenue growth, and earnings performance, investors can make more informed decisions backed by comprehensive data analysis.
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