Can Fidelity National (FIS) Keep the Earnings Streak Alive? - Analyst Blog

Fidelity National Information Services, Inc. (FIS), leading provider of banking and payments technology solutions is set to release the third-quarter earnings on Oct 30, 2014.

In the last quarter, the company delivered a positive surprise of 17.19%. Thecompany has delivered positive earnings surprises in the last four quarters with an average beat of 18.34%. Let's see how things are shaping up for this announcement.

Factors to Consider

We expect Fidelity to witness strong organic revenue growth over the long term backed by its broad and diverse customer base, high recurring revenues from processing and maintenance (approximately 80% of revenues) and continued technology upgrades. Further, a steady flow of new customers will boost the company's top-line growth over the long run.

However, Fidelity believes that consolidation within the banking and financial services industry will continue in the near future. This might have a negative impact on its revenue growth, particularly in those cases where the company is providing multiple services to both merchant entities. Moreover, the mix shift toward electronic transactions increases the risk of fraud, which is a concern, going forward.

Fidelity's core banking products and services as well as mortgage information services are part of a highly competitive market with players like Heartland Payment Systems, Inc. (HPY). Moreover, the market for core banking products and services is considerably mature and comprises a number of competitors with high level of experience and commanding significant market share.

Given the attractive prospects in the financial services market, there are always new entrants seeking to leverage the shifts in technology or product innovation to attract customers. We expect the company to face significant competition from such companies, going forward.

Earnings Whispers?

Our proven model does not conclusively show that Fidelity National is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are poised at 77 cents.

Zacks Rank: Fidelity National carries a Zacks Rank #3 (Hold), which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are a couple of companies that you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter: 

Invensense Inc. (INVN), with an Earnings ESP of +10.00% and a Zacks Rank #2 (Buy).

Western Digital Corp. (WDC), with an Earnings ESP of +0.98% and a Zacks Rank #3.

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FIDELITY NAT IN (FIS): Free Stock Analysis Report
 
WESTERN DIGITAL (WDC): Free Stock Analysis Report
 
INVENSENSE INC (INVN): Free Stock Analysis Report
 
HEARTLAND PAYMT (HPY): Free Stock Analysis Report
 
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