Fidelity National Information Services, Inc. (FIS – Free Report) ) is set to release fourth-quarter 2016 earnings results on Feb 7. In the last quarter, the company reported a positive earnings surprise of 2.04%. The company delivered positive earnings surprises in three out of the last four quarters, with an average positive earnings surprise of 3.36%.
Further, in the past year, Fidelity’s shares have generated a positive return of 31.42% compared with the Zacks Financial Transaction Services industry’s gain of 17.37%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Over the years, Fidelity has strengthened its dominant position in the financial and payments solutions business, primarily based on its superior product portfolio.
Also, Fidelity is well positioned to benefit from increasing investment in mobile banking and innovative products such as PayNet. Mobile banking is developing into an essential extension of online banking with accelerating smartphone and tablet usage. Fidelity’s recent partnership with PayPal (PYPL – Free Report) for digital payments is likely to boost its customer engagement.
Per media reports, the company inked a deal in Dec 2016 to sell SunGard Public Sector and Education businesses to Vista Equity Partners for $850 million. The sale of the units is in line with its strategy to focus more on its core operations of providing software, technology and processing services to the retail and institutional banking, payments, and asset and wealth management sectors.The company intends to utilize the expected cash proceeds (net of taxes and deal-related expenses) of $500 million in reducing its outstanding debt.
Nevertheless, increasing consolidation in the banking sector, challenging environment for the Payments Solutions business and sluggish demand of people-based professional services are the primary headwinds. Also, intensifying competition from the likes of Fiserv Inc. (FISV – Free Report) , Global Payments Inc. and Alliance Data Systems Corp. remains a concern.
Our proven model does not conclusively show that Fidelity is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:
Zacks ESP: Earnings ESP for Fidelity is +0.88%. This is because the Most Accurate estimate stands at $1.15 while the Zacks Consensus Estimate is pegged at $1.14. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Fidelity has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Ranks #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stock to Consider
Here is a stock that, as per our model, has the right combination of elements to post an earnings beat this quarter:
Twilio Inc. (TWLO – Free Report) with an Earnings ESP of +8.33% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
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