Fidelity National Information ServicesFIS first-quarter 2018 adjusted earnings per share from continuing operations came in at $1.09, surpassing the Zacks Consensus Estimate of $1.04. Also, earnings improved 32.9% from the year-ago quarter figure of 82 cents.

Shares of Fidelity gained nearly 1% in pre-market trading session, reflecting investors’ optimism on lower expenses and expanding margin in first-quarter results. Also, the company raised full-year 2018 guidance on relatively strong first quarter performance. However, decline in revenues and huge outstanding debt remain key headwinds.

The company reported net earnings of $182 million or 54 cents in the quarter compared with $129 million or 39 cents in the prior-year quarter.

Decline in Expenses Partially Offset by Lower Revenues

GAAP revenues for the quarter came in at $2.07 billion, which declined 3.8% year over year. However, the figure surpassed the Zacks Consensus Estimate of $2.04 billion.

Organic revenue growth was 3.3% in the quarter.

Selling, general and administrative expenses came in at $358 million, down 12.9% year over year.

Segment wise, Integrated Financial Solutions’ GAAP revenues grew 2.3% year over year to $1.04 billion while revenues from Global Financial Solutions declined 7.6% to $927 million. Corporate/Other revenues decreased 27.6% to $78 million.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) rose nearly 6.7% year over year to $705 million while adjusted EBITDA margin expanded 340 basis points to 34.1%.

Balance Sheet & Cash Flow

As of Mar 31, 2018, cash and cash equivalents were $725 million compared with $705 million as of Mar 31, 2017. Debt outstanding was nearly $9.08 billion.

In the first quarter, net cash provided by operations was $354 million and free cash flow was $226 million.

Fidelity paid dividends worth $106 million in the quarter and repurchased 4.1 million shares at a total cost of about $400 million.

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 $5.14-$5.34, up from $5.10-$5.30 expected previously.

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

Our Take

Fidelity enjoys a dominant position in financial and payments solutions business, backed by its robust product portfolio. We believe that the company is well positioned to benefit from increasing investment in digitization. However, increasing consolidation in the banking sector, challenging environment for the Payments Solutions business and an uncertain regulatory environment are the primary headwinds.

Fidelity National Information Services, Inc. Price, Consensus and EPS Surprise

Fidelity currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Stocks

Led by higher spending on its branded cards, Visa V reported second-quarter fiscal 2018 (ended Mar 31, 2018) earnings of $1.11 per share, beating the Zacks Consensus Estimate by 9.9%. Also, the bottom line improved 30% year over year.

Capital One Financial Corporation’s COF first-quarter 2018 adjusted earnings of $2.65 per share surpassed the Zacks Consensus Estimate of $2.34. Also, it compared favorably with the year-ago quarter’s adjusted earnings of $1.75.

CIT Group’s CIT first-quarter 2018 adjusted earnings from continuing operations of 74 cents per share lagged the Zacks Consensus Estimate of 96 cents. However, this was above the prior-year quarter’s figure of 54 cents per share.

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