Fidelity National Information Services Set to Bounce Back in Q2
Fidelity National Information Services FIS Aiming for Stronger Q2
Analysts recently adjusted their price forecasts for Fidelity National Information Services, Inc. (NYSE: FIS) following the company's fourth-quarter results. The financial services firm reported revenues of $2.599 billion, a figure that marked a 3% increase year-over-year, but fell short of the consensus estimate of $2.63 billion. Its adjusted earnings per share (EPS) of $1.40, reflecting a striking 49% year-over-year growth, did surpass the expected $1.36.
Future Revenue Predictions
Looking ahead, Fidelity National expects a revenue range between $10.435 billion and $10.495 billion for the upcoming fiscal year. This projection is slightly lower than the consensus of $10.6 billion, with anticipated adjusted EPS ranging from $5.70 to $5.80, just below the Street's expectation of $5.72.
First Quarter Insights
For the first quarter of 2025, Fidelity National forecasts revenues between $2.485 billion and $2.510 billion, which compares unfavorably against the estimated $2.568 billion. Its anticipated adjusted EPS ranges from $1.17 to $1.22, again lower than the estimate of $1.28.
Analyst Ratings and Price Adjustments
A notable shift occurred when BofA Securities analyst Jason Kupferberg adjusted his price forecast from $96.00 down to $87.00 while maintaining a Buy rating. The analyst attributed this change to concerning trends in banking growth observed during the fourth-quarter of fiscal year 2024 and first-quarter of fiscal year 2025.
Challenges Identified
Management highlighted several headwinds encountered towards the end of the quarter. These include a 1% contract adjustment that negatively affected recurring Banking revenue, alongside a 3% drop in non-recurring revenue caused by a delayed licensing agreement and a $20 million reversal of a termination fee linked to a canceled bank merger.
Looking Ahead
Despite these challenges, Kupferberg believes that banking revenue growth for 2025 could rebound, projecting a 3.7%-4.4% increase. This boost is expected to be driven by strong sales from 2024, which rose by 9% year-over-year, and approximately 60 basis points from the Dragonfly acquisition.
Segment Performance Forecast
Additionally, recurring revenues are likely to outpace the overall growth of this segment. However, non-recurring revenues and professional services might experience slower growth rates. Kupferberg also anticipates that Wealth Management (WP) revenue could hinder performance by 20-30 basis points.
Free Cash Flow and Investor Focus
Regarding Cash Flow estimates for 2025, guidance expects a conversion rate of 82%-85% due to enhancements in the management of Accounts Payable (AP) and Accounts Receivable (AR). With the banking segment underperforming, investor attention is shifting towards Free Cash Flow (FCF) performance.
Other Analysts’ Forecasts
Several analysts have made their own adjustments to price forecasts for Fidelity National:
- Susquehanna saw a downgrade from Positive to Neutral and a cut in the price forecast from $103 to $81.
- RBC Capital maintained an Outperform rating but lowered the forecast from $104 to $95.
- Wells Fargo kept an Equal-Weight rating and decreased the price target from $88 to $80.
- Stephens & Co. reiterated an Overweight rating while revising the price forecast from $100 to $90.
- Compass Point maintained Buy status but cut their forecast from $126 to $113.
- Morgan Stanley retained an Equal-Weight rating, reducing their forecast from $92 to $86.
- Keefe, Bruyette & Woods maintained Outperform with a downgrade from $102 to $92.
Investment Opportunities
For investors looking to gain exposure to Fidelity National or the financial technology sector, they can consider investing in funds like the Global X FinTech ETF (NASDAQ: FINX) and the Amplify Digital Payments ETF (NYSE: IPAY).
Market Reaction
As of the latest market check, shares of FIS are down by 0.42%, trading at $72.85.
Frequently Asked Questions
What were the revenue figures for Fidelity National Information Services?
The company reported revenue of $2.599 billion, which was a 3% year-over-year increase.
What is the price forecast adjusted by analysts for Fidelity National?
Analysts have lowered their price forecasts, with the current significant forecast being $87.00 from BofA Securities.
What are the expected Q1 results for Fidelity National?
The company anticipates revenues between $2.485 billion and $2.510 billion for Q1 2025.
What ETFs can investors consider to gain exposure to Fidelity National?
Investors can consider the Global X FinTech ETF (FINX) and Amplify Digital Payments ETF (IPAY).
How did Fidelity National's stock perform recently?
As of the latest market update, the stock is down 0.42% at $72.85.
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