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What's in Store for First Data (FDC) this Earnings Season?

First Data Corporation FDC is set to report second-quarter 2017 results on Aug 7. In the trailing four quarters, the company has beaten the Zack Consensus Estimate thrice and matched it once, delivering an average positive surprise of 6.08%.

Last quarter, the company reported earnings of 21 cents, which were in line with the Zacks Consensus Estimate. Revenues increased 1.89% year over year to $1.73 billion and beat the Zacks Consensus Estimate of $1.71 billion.

Notably, First Data’s shares have gained 28.7% year to date, substantially outperforming the industry’s loss of 1.3%.

Let's see how things are shaping up for this announcement.

Factors at Play

First Data’s focus on globalizing its offerings and strategic partnerships along with a healthy business around large and small banks is likely to positively impact its top-line growth. The company’s SMB turnaround plan is expected to boost its North American merchant business. The company has also been improving on both merchant and sales force attrition.

Moreover, First Data continues to expand its enterprise business by consistently offering new features and solutions to existing clients and making continuous efforts to expand its client base.

The company’s Global Financial Solutions (GFS) business, backed by key contract wins, has strong potential to grow. In the first quarter GFS APAC business grew 25% and is expected to continue to grow, driven by new business and internal growth mainly in Australia.

However, the company is not immune to seasonality and foreign exchange risk, which remain concerns.

Earnings Whispers

Our proven model does not conclusively show that First Data is likely to deliver a positive surprise this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: First Data’s Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 34 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: First Data’s Zacks Rank #3 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 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are a few companies that you may want to consider as our model shows that these have the right combination of elements to deliver an earnings beat in their upcoming release:

Luxoft Holding LXFT with an Earnings ESP of +5.17% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.                      

Broadcom AVGO with an Earnings ESP of +2.57% and a Zacks Rank #2.

CACI International CACI with an Earnings ESP of +1.83% and a Zacks Rank #2.

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First Data Corporation (FDC): Free Stock Analysis Report
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