Tags: Fidelity | National | Information | FIS

Fidelity National Information Services Faces Competition

By Greg Brown   |   Monday, 13 Aug 2012 04:18 PM

Fidelity National Information Services (FIS) retains a commanding position in the financial services sector, driven in part by M&A over the past few years. Nevertheless, analysts warn, it has rung up debt and faces stiff competition.

Fidelity National Information Services is a leading global provider dedicated to banking and payments technologies. With a long history deeply rooted in the financial services sector, FIS serves more than 14,000 institutions in more than 100 countries.

Headquartered in Jacksonville, Fla., FIS employs approximately 33,000 people worldwide and holds leadership positions in payment processing and banking solutions, providing software, services and outsourcing of the technology that drives financial institutions.

On Oct. 1, 2009, FIS completed the acquisition of Metavante, expanding the scale of its core processing and payment capabilities and adding comprehensive trust and wealth management processing services, as well as the NYCE Network, which joined the company’s existing EFT offerings.

In addition, Metavante added significant scale to the company’s treasury and cash management offerings and provided an entry into the healthcare and government payments markets, FIS management said in a recent filing

On Dec. 2, 2010, FIS acquired Capco, a global business and technology consultancy dedicated solely to the financial services industry. Capco broadened capabilities to provide integrated consulting, technology and complex, large-scale transformation services, FIS said.

“Our growth has been driven organically as well as through acquisitions, which have contributed critical applications that are complementary to or enhance existing offerings, including core banking solutions, outsourcing solutions for community banks, credit unions, and other financial institutions, item processing services, card issuer services, risk management solutions, EFT services, prepaid/gift card processing, as well as solutions for global organizations and for those domiciled outside of North America,” FIS management said.

“These strategic transactions have enabled us to quickly broaden our available solution offerings, scale our operations, expand our customer base and strengthen our competitive position. “

Fidelity National Information Services has a market cap of $9.15 billion in a sector, IT services, where the average company size is $10.02 billion. Its trailing 12-month P/E ratio is 18.16 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.42, compared to 1.62 for the sector.

Its projected earnings per share growth for the coming year is 9.88 percent, compared to a sector average of 12.27 percent.

Commanding position


Analysts are generally positive on FIS, with buy or outperform calls from Raymond James, Oppenheimer & Company, and Smith Barney.

“We believe that Fidelity’s commanding position in the financial services market, increasing international exposure, recurring revenue model, diversified product portfolio, cost synergies from acquisitions and a loyal customer base will drive growth over the long term,” said the analysts at Zacks Investment Research in a note in late July, rating the stock neutral.

“However, increasing consolidation in the banking sector, a challenging environment for the Payments Solutions business, uncertain regulatory environment, a highly leveraged balance sheet and intense competition from other major players such as Fiserv remain the primary headwinds.”

Fidelity National Information Services next reports on Oct. 30.

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