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Fiserv (FISV) Set to Grow on Diverse Products and Buyouts

On May 14, we issued an updated research report on Fiserv, Inc. FISV.

Fiserv’s first-quarter 2016 adjusted earnings from continuing operations of $1.06 per share came ahead of the Zacks Consensus Estimate of $1.02 and improved 19.1% from the year-ago quarter. Total revenue increased 4.4% year over year to $1.331 billion but missed the Zacks Consensus Estimate of $1.338 billion.

Fiserv is one of the leading names in the financial and payments solutions business. We believe that the broad and diverse customer base, efforts to enhance operational efficiency, high recurring revenues and continued technology upgrades will help the company to drive growth. The company is also expected to benefit from its new five year operational effectiveness program.

Fiserv expects to achieve savings of $250 million from this initiative with $40 million targeted for 2016. Management had earlier projected annual internal revenue growth of 5%–6% and earnings growth of 11%–14% over the long term.

The company has a strong user base in Mobiliti ASP, which remains a major growth driver. Moreover, the company expects revenues from base solutions like DNA, Agiliti, EMV and Now, to grow in 2016 and beyond.

Accretive acquisitions have been a key growth factor for Fiserv over the years. In Mar 2016, the company completed the acquisition of ACI Worldwide’s Community Financial Services business (announced in Jan 2016 and including employees, contracts, IP and technology assets) in an all cash deal valued at $200 million. Though the details aren’t available as of yet, Fiserv expects ACI's CFS business, which adds to its digital banking and electronic payments solutions, to be accretive to financials beginning 2017. It also acquired a small business – Billers Solutions, which has expanded its presence on the SaaS platform.

However, investors should keep in mind that tightening regulations in the banking and financial services industry and stiff competition could have a negative long-term impact.

Over the last 30 days, the Zacks Consensus Estimate for 2016 and 2017 was slightly revised upward to $4.43 and $4.97, respectively, from $4.39 and $4.95 estimated earlier.

Zacks Rank & Other Stocks to Consider

Fiserv currently carries a Zacks Rank #2 (Buy). Other well-placed stocks in the same space are Total System Services, Inc. TSS, WEX Inc. WEX and Fidelity National Information Services, Inc. FIS. While Total System Services and WEX Inc sport a Zacks Rank #1 (Strong Buy), Fidelity National Information carries the same rank as Fiserv.

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WEX INC (WEX): Free Stock Analysis Report
 
FIDELITY NAT IN (FIS): Free Stock Analysis Report
 
TOTAL SYS SVC (TSS): Free Stock Analysis Report
 
FISERV INC (FISV): Free Stock Analysis Report
 
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