Fidelity National Information Services Is Getting Interesting

Ashleigh Rogers profile picture
Ashleigh Rogers
932 Followers

Summary

  • Changing regulatory requirements for banks will make Fidelity National Information Services products more in demand just as rate increases boost bank's income.
  • The firm offers a suite of services that are also becoming more important for modern international banks.
  • Together the recovery in the US and long-term growth internationally should support substantial long-term growth in Fidelity National Information Services' earnings and share price.

Fidelity National Information Services (NYSE:FIS) is a backend provider of processing services to other financial institutions. The company has underperformed operationally over the last year or so as the broader financial industry has struggled against a backdrop of low interest rates, low equity volatility, and an anemic fixed income trading environment. This difficult external environment has only been partially offset by FIS' high degree of recurring revenue in the transaction processing business. These issues appear to be starting to abate and for investors looking to take a position in a nuts-and-bolts financial infrastructure firm, Fidelity National Information Services is a good choice at this point.

FIS management has sounded increasingly positive on the overall operating environment over the last couple of conference calls, and the firm's strategy of focusing on larger financial institutions (or FIs) seems to be paying dividends. I expect to see FIS' revenue growth accelerate as we enter 2H2014, and by year end, mid-single digit revenue growth is likely. Fidelity National Information Services is seeing some issues in certain geographies (like Brazil which has been positively anemic recently), but if the global economy picks up these (as it appears to be), this should be less of an issue in the second half as well. What's more, FIS is likely to start repurchasing shares in earnest going forward with a $2B authorization remaining (only $175M in repurchase completed in 1Q2014).

All told then I think FIS is worth a look given the firm's strong pipeline, likely growth acceleration over the next six months (company outlook is for 4.5-6.5% organic revenue growth and EBITDA growth). The broader international market for the firm appears particularly promising with the firm now having seen three straight quarters of double-digit revenue growth here (10% in the most recent quarter). While international markets are seeing a bit of margin pressure, I think

This article was written by

Ashleigh Rogers profile picture
932 Followers
I focus on writing about individual stocks, frequently in the financial industry. I work as a mid-level executive in the insurance industry on the portfolio management side. I'm an experienced stock investor, and I'm eager to share my industry expertise and what I've learned about investing with other Seeking Alpha users.

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