Is Fidelity (FIS) Poised to Beat Earnings Estimates? - Analyst Blog

Fidelity National Information Services, Inc. FIS is set to report first quarter 2014 results on May 1. Last quarter, it posted a 13.4% positive surprise. We note that Fidelity has outperformed the Zacks Consensus Estimate in the preceding four quarters with an average positive surprise of 11.4%.

Let's see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Fidelity's commanding position in the financial services market, increasing international exposure, recurring revenue model, diversified product portfolio, cost synergies from acquisitions and a loyal customer base will drive growth over the long term.

Moreover, strong demand for its solutions such as the Cardless Cash Access solution and Active Analytics suite are expected to boost top-line growth in the near term. The company continues to win contracts from banks and financial institutions in the overseas market, which will further drive its market share.  

Additionally, the company's recent partnership with Microsoft MSFT to fight cybercrime is also a significant positive, as it will help it to expand in the fast growing cyber security market.

However, increasing consolidation in the banking sector, challenging environment for the Payments Solutions business and an uncertain regulatory environment are the primary headwinds, in our view. Moreover, competition from Fiserv FISV and Global Payments GPN is a major concern in the near term.

Earnings Whispers?

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

Zacks ESP: The Most Accurate estimate stands at 56 cents and coincides with the Zacks Consensus Estimate. Hence, the difference is 0.00%.

Zacks Rank: Fidelity's Zacks Rank #3 (Hold) when combined with 0.00% ESP makes surprise prediction difficult.

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