Fidelity National Information Services Inc. (FIS)initiated its first quarter 2011 guidance in an 8K filing. While the top-line outlook matched the Zacks Consensus Estimate, bottom-line guidance missed expectation. However, Fidelity reiterated its full year 2011 outlook, given out during the fourth quarter 2010 earnings call.
For the first quarter, ending March 31, 2011, Fidelity expects earnings per share (EPS) to be in the range of 44 to 46 cents (7.0% to 12.0% year over year). The guidance missed the Street estimates and the Zacks Consensus Estimate of 49 cents. Lower EPS reflects increased integration charges related to the company’s Metavante and Capco acquisition.
Revenue is expected to be in the range of $1.36–$1.38 billion for the quarter. Currently, the Zacks Consensus revenue Estimate is pegged at $1.37 billion for the first quarter, which is in line with management’s guided range. Fidelity expects EBITDA in the range of $370.0 to $380.0 million for the quarter.
For full year 2011, Fidelity continues to expect adjusted earnings per share from continuing operations of $2.24 to $2.34, up 11.0% to 16.0%, compared with $2.02 in fiscal 2010. Currently, the Zacks Consensus Estimate is pegged at $2.32, roughly in line with the high end of the guidance.
Revenue is expected to grow 9.0% to 11.0% (4.0% to 6.0% organically) for fiscal 2011. EBITDA is projected to increase 7.0% to 9.0% and free cash flow is expected to approximate the adjusted net earnings in 2011. Fidelity expects $48.0 million of cost savings in fiscal 2011.
Fourth Quarter Results
Fidelity reported strong fourth quarter 2010 results, with revenue increasing 7.6% year over year to $1.4 billion (6.1% organically), primarily driven by strong results from Financial Solutions and International Solutions.
Earnings, on a non-GAAP basis, from continuing operations jumped 42.2% year over year to 64 cents per share from 45 cents reported in the prior-year quarter, beating the Zacks Consensus Estimate of 60 cents.
In fiscal 2010, revenue increased 4.2% year over year (3.2% organically) to $5.20 billion. Earnings on a non-GAAP basis increased 22.4% year over year to $2.02 per share, surpassing the Zacks Consensus Estimate of $1.98.
Estimate Revisions in Last 30 Days
EPS estimates for the first quarter are in a downward mode with 8 out of 16 analysts reducing their estimates in the last 30 days. Although 2 analysts raised their estimates, it was not sufficient to stop the slide, as the Zacks Consensus declined from 51 cents to 49 cents in the last 30 days. The full-year Zacks Consensus Estimate for 2011 also decreased by a penny to $2.32 over the past month.
Our Take
Despite a strong fiscal 2010 results, we maintain our Neutral rating over the long term, primarily due to higher debt levels and increasing competition from Fiserv Inc. (FISV) and International Business Machines Corp. (IBM)
We believe Fidelity’s increasing penetration into emerging markets such as Brazil and China will drive organic revenue growth over the long term. Moreover, continued market share gains, global expansion, a strong product portfolio and cost-saving synergies will drive earnings growth going forward.
The first quarter is seasonally weak for the company; hence we remain cautious on a near-term basis. However, we expect 2011 results to be back end loaded given the company’s strong organic growth and international expansion. Currently, Fidelity has a Zacks #3 Rank, which implies a short-term Neutral rating (for the next 1-3 months).
FIDELITY NAT IN (FIS): Free Stock Analysis Report
FISERV INC (FISV): Free Stock Analysis Report
INTL BUS MACH (IBM): Free Stock Analysis Report
Zacks Investment Research
