Guggenheim: Fiserv's Q1 Results Indicate Strong Business Momentum

Fiserv Inc FISV reported higher-than-expected first-quarter results Tuesday, with healthy internal revenue growth.

The investor focus is likely to remain on the merger with First Data Corporation FDC deal, and the fact that First Data reported a strong first quarter results bodes well for Fiserv, according to Guggenheim Securities.

The Analyst

Jeff Cantwell maintained a Buy rating on Fiserv and raised the price target from $95 to $96.

The Thesis

Fiserv reported first-quarter adjusted EPS of 84 cents, 4 cents higher than Guggenheim's estimate, Cantwell said in a Tuesday note. (See his track record here.) 

Internal revenue grew 5 percent year-on-year and adjusted EPS rose 12 percent.

The quarterly results indicated continued momentum in the company’s underlying business, the analyst said.

Fiserv announced 21 new clients in the first quarter, including Atlanta Postal CU, which has $2.1 billion in assets, and Nassau Educators Federal CU, with $3.2 billion in assets, he said. 

While the core processing client segment signed 14 new institutions, DNA brought six new clients on board, four of which have assets over $1 billion, Cantwell said. 

Financial institutions seem “cautiously optimistic” about their spending and growth over the next 12-18 months, which is a positive for Fiserv, according to Guggenheim. 

The company’s 2019 guidance remains unchanged. Regarding the First Data deal, Fiserv said its post-closing revenue and cost synergy targets are achievable, the analyst said.

Cantwell said he expects the combined company to be well-positioned to capture the growing demand for faster payments solutions from financial institutions and merchants.

Price Action

Shares of Fiserv rose slightly to close trading at $87.24 on Tuesday.

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