Fidelity National Information Services, Inc. FIS benefits from strong Banking Solutions and Capital Market Solutions businesses, digital transformation opportunities, partnerships, and a robust cash flow supporting shareholder returns.

FIS’ Zacks Rank & Price Rally

Fidelity National currently carries a Zacks Rank #3 (Hold).

The stock has gained 38.8% in the past year compared with the industry’s 24.2% growth. The Zacks Business Services sector rose 23.3% and the S&P 500 composite index increased 28.4% in the same time frame.

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Fidelity National’s Robust Growth Prospects

The Zacks Consensus Estimate for FIS’s 2024 earnings is pegged at $5.18 per share, indicating a year-over-year improvement of 53.7%.  The consensus estimate for 2025 earnings is pegged at $5.72 per share, indicating an increase of 10.4% from the 2024 estimate.

Northbound Estimate Revision of FIS

The Zacks Consensus Estimate for 2024 earnings has been revised upward 1.4% in the past 60 days.

FIS’s Decent Earnings Surprise History

The bottom line of Fidelity National outpaced estimates in three of the trailing four quarters and missed the mark once, the average surprise being 8.16%.

Fidelity National’s Business Tailwinds

Fidelity National's revenue growth continues to benefit from strong performances in its Banking Solutions and Capital Market Solutions segments. The Banking unit is supported by new client acquisitions while robust sales growth in the Capital Markets business drives recurring revenue growth. Although the majority of its revenues come from U.S.-based clients, FIS also has notable international exposure in markets such as the United Kingdom, Germany, Australia, Brazil and Canada.

The company leverages both organic growth initiatives and acquisitions to secure multi-year recurring contracts. Through its organic growth strategies, Fidelity National develops advanced solutions and implements targeted sales and marketing efforts to attract new clients and expand its presence in addressable markets.

Acquisitions enhance FIS’ product offerings, diversify its customer base, extend geographic reach and facilitate entry into new markets. It also collaborates with other entities to deliver comprehensive solutions to the partners' clients. This November, Fidelity National teamed up with Oracle to enhance billing and payment solutions for the utility sector, including electricity, gas, water and other essential services through leveraging FIS' BillerIQ on Oracle Cloud Infrastructure. 

The ongoing wave of digital transformation presents a significant opportunity for Fidelity National to leverage its comprehensive suite of technology solutions. The company continues to invest in technology advancements, process improvements and infrastructure upgrades, aiming to enhance operational efficiencies.

A strong cash position and robust cash flow generation capabilities enable FIS to make business investments and return value to shareholders through share buybacks and dividend payments. As of Sept. 30, 2024, cash and cash equivalents were up three-fold from the 2023-end level. It generated operating cash flows of $1.4 billion in the first nine months of 2024, which advanced 7.1% from the prior-year comparable period. The company boasts a dividend yield of 1.7%, higher than the industry average of 0.7%.

FIS’s Key Risks

Fidelity National faces several headwinds, including inflationary pressures, that could impact consumer spending patterns and transaction revenues. It expects the ongoing consolidation within the banking and financial services sector to persist in the near term, potentially hindering revenue growth by reducing its existing customer base. The declining use of checks impacts the check warranty and item processing businesses of FIS, while the shift to electronic payments heightens fraud risks. Additionally, a high debt burden limits financial flexibility.

Stocks to Consider

Some better-ranked stocks in the Business Services space are ICF International, Inc. ICFI, RCM Technologies, Inc. RCMT and SPS Commerce, Inc. SPSC. ICF International currently sports a Zacks Rank #1 (Strong Buy), and RCM Technologies and SPS Commerce carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ICF International’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 13.56%. The Zacks Consensus Estimate for ICFI’s 2024 earnings implies an improvement of 14.5% from the 2023 figure. The consensus mark for revenues indicates a 2.8% rise from the 2023 figure. The consensus mark for ICFI’s 2024 earnings has moved 2.9% north in the past 30 days.

The bottom line of RCM Technologies beat estimates in two of the trailing four quarters and matched the mark twice, the average surprise being 4.16%. The Zacks Consensus Estimate for RCMT’s 2024 earnings implies an improvement of 11.9% from the 2023 figure. The consensus mark for revenues implies a rise of 5.9% from the 2023 figure. The consensus mark for RCMT’s 2024 earnings has moved 1.3% north in the past 60 days.

SPS Commerce’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 10.65%. The Zacks Consensus Estimate for SPSC’s 2024 earnings indicates an improvement of 21.1% from the 2023 figure. The consensus mark for revenues indicates an 18.5% rise from the 2023 figure. The consensus mark for SPSC’s 2024 earnings has moved 2.1% north in the past 60 days.

SPS Commerce stock has gained 2.8% in the past year. However, shares of ICF International and RCM Technologies have lost 7.1% and 22%, respectively, in the same time frame.

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