First Data A New 'Fresh Pick' At Baird As Various Financial Metrics Continue To Improve

First Data Corp (NYSE:FDC)'s stock is up just 3 percent over the past year, but multiple improving financial metrics supports the bullish case for owning the stock.

The Analyst

Baird Equity Research's David Koning maintains an Outperform rating on First Data with an unchanged $22 price target. The stock was added to the firm's "Fresh Picks" list.

The Thesis

The case for being incrementally bullish on First Data is mostly based on multiple improving financial metrics, Koning said in a note. Revenue growth should remain stable at 3 to 5 percent, but with an improving mix from fast-growth channels. The company could refinance its $3.4 billion note at 7 percent, which would more than offset a $46 million interest expense impact from rising rates.

Koning also said company's tax rate could fall from an estimated 27.5 percent in 2018 to the mid-20s over time due to falling interest expenses and tax deductibility improvements.

If the stock rallies to $20 by the end of 2018, it will end the year at a 13 times next 12 months P/E, which is only slightly higher than recent levels and 10 times next 12 months EBITDA which is similar to recent levels.

Price Action

Shares of First Data were trading lower by 0.9 percent Monday at $16.50.

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