By Emily Bary
'The consumer remains resilient,' CEO says
An earlier version of this report misstated Chief Executive Frank Bisignano's title.
Shares of Fiserv Inc. gained more than 4% Tuesday after the merchant-acquiring company's better-than-expected revenue growth outweighed concerns on margins.
Fiserv (FISV) saw revenue climb 9.8% to $4.45 billion from $4.05 billion, while analysts tracked by FactSet were anticipating $4.23 billion. The company delivered "astonishing top-line growth driven by execution and inflation," wrote Mizuho analyst Dan Dolev.
Net income more than doubled to $598 million, or 92 cents a share, from $269 million, or 40 cents a share, in the year-prior quarter. On an adjusted basis, Fiserv earned $1.56 a share, up from $1.37 a year before, whereas analysts had been looking for $1.55 a share.
"The consumer remains resilient," Chief Executive Frank Bisignano said on the company's earnings call, according to a transcript from Sentieo. "And visibility on the expense side is very, very clear."
Clover, Fiserv's payments platform for smaller businesses that MarketWatch recently profiled, grew revenue by 24% from a year earlier, while volumes rose 27% to $58 billion.
Bisignano noted that Fiserv's BentoBox acquisition has been "fully integrated into Clover for all e-commerce payments" and that, when BentoBox and Clover are sold together, the company recognizes a more than 3-times increase in average revenue per user compared with when restaurants only use Clover.
Read: Clover finds winning formula as it takes on the 'Apple' of payment devices
Fiserv boosted its full-year outlook on several metrics and now expects 9% to 11% in organic revenue growth, along with $6.45 to $6.50 in adjusted earnings per share. The company's prior forecast called for 7% to 9% growth and $6.40 to $6.55 in adjusted EPS.
While analysts praised the company's revenue trends, they highlighted some investor concerns around margins and free-cash flow. Fiserv now anticipates at least 100 basis points (1.00 percentage points) of operating-margin expansion this year, whereas it previously was targeting at least 150 basis points of expansion. The company also is modeling 90% to 95% free-cash-flow conversion, below its prior forecast for 95% to 100%.
Wolfe Research's Darrin Peller said that while Fiserv's latest results were "positive," investors have been asking him about the areas on which the company cut its forecasts.
Still, he said that he "suspect[ed] the magnitude of strength on the top-line combined with raise to revenue and EPS expectations in the backdrop of this uncertain environment will outweigh questions in today's and forward trading, particular[ly] as both margin and FCF improve in 2H and normalize higher in '23+," he wrote.
Barclays analyst Ramsey El-Assal flagged that Fiserv's lower free-cash conversion reflects growth in spending on technology infrastructure, hardware inventory, and working capital investments. But he thinks that many of the areas where the company is heavily investing now won't be recurring, meaning the company can see improved conversion next year.
"At the same time, while inflation is certainly impacting FISV's opex [operating expenditures], the company is also making strategic investments in innovation, software, and M&A [merger and acquisition] integration," he continued. "Given the current market valuation environment seems to favor top line strength vs. earnings power, we see FISV's more aggressive investment strategy -- and subsequent potential revenue growth acceleration -- as a winning strategy."
Fiserv shares have risen 6% over the past three months as the S&P 500 has lost 6%.
(END) Dow Jones Newswires
July 26, 2022 16:03 ET (20:03 GMT)
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