Fiserv's Shares Rise 17% in a Year: Here's What You Need to Know
Fiserv, Inc. FI had an impressive run in the past year. The company’s shares have risen 16.9% compared with its industry and the Zacks S&P 500 composite’s growth of 7.3% and 2.9%, respectively.
Three-Months Price Performance
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FI’s revenues are expected to increase 6.3% year over year in 2024 and 9.1% in 2025. Its earnings are estimated to grow 16.2% in 2024 and 15.7% in 2025.
Fiserv’s Positive Earnings Surprise
FI has delivered a decent earnings surprise in the trailing four quarters. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an earnings surprise of 2.8%, on average.
FI’s Northward Estimate Revisions
13 estimates for 2024 have moved north in the past 60 days versus no southward revision, reflecting analysts’ confidence in the company. The Zacks Consensus Estimate for 2024 earnings has moved up from $8.69 per share to $8.74 in the same time.
Q2 Top-Line Performance Favors Fiserv
In the second quarter of 2024, total revenues of Fiserv increased 7% year over year. The processing and services revenues grew 5.5% on a year-over-year basis. The product segment witnessed growth of 16.2% from the year-ago quarter’s level. Revenues in merchant acceptance increased 9.2% year over year. Growth in revenues across the segments was led by small customers and the digital payments business.
Positive Operating Leverage Boosts FI
Fiserv is benefiting from a positive operating leverage on the back of the low cost of adding more customers, which is leading to higher business margins. In the second quarter of 2024, FI reported an adjusted operating of 38.4%, up 160 basis points from the year-ago quarter’s level. The addition of more customers within its platforms is expected to extract more synergies and enhance FI’s business margins. Hence, we anticipate the operating margin to continue to rise.
FI has observed a marginal decline in its selling, general and administrative expenses despite the rising inflation and pressure on wage growth. Such a trend suggests that the management has been able to control cost rise which is another reason why the company’s operating leverage is positive.
Fiserv’s Raised 2024 Guidance
Strong performance in the second quarter of 2024 and confidence over the unique opportunity led Fiserv to raise its guidance for the year. The company has raised the guidance for adjusted earnings per share to $8.65-$8.80 compared with $8.60-$8.75 provided in the first quarter of 2024. Fiserv raised its year-over-year earnings per share growth guidance to 15-17% from the first quarter’s view of 14-16%.
Fiserv raised its adjusted operating margin guidance by 135 basis points from the first quarter’s view of 125 basis points. FI increased its guidance for 2024 free cash flow to $4.7 billion from $4.5 billion provided in the first quarter. Raised guidance often leads to rising investor interest which can drive the share price upward.
Zacks Rank & Stocks to Consider
Fiserv carries a Zacks Rank #3 (Hold) at present.
Investors interested in the Zacks Business Services sector may look at some better-ranked stocks like Docusign DOCU and AppLovin APP, each sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Docusign has a long-term earnings growth expectation of 9.3%. DOCU delivered a trailing four-quarter earnings surprise of 18.3%, on average.
AppLovin has a long-term earnings growth expectation of 20%. APP delivered a trailing four-quarter earnings surprise of 21.1%, on average.
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