Fiserv Benefits From Acquisitions Despite Increased Competition

Fiserv, Inc. FI shares have surged 73.3% in the past year, outperforming the industry and the Zacks S&P 500 composite’s growth of 31.8% and 32.4%, respectively.

One Year Price Performance

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Fiserv reported mixed third-quarter 2024 results. FI’s adjusted earnings per share (excluding $1.3 from non-recurring items) of $2.3 beat the consensus mark by 2.2% and gained 17.4% year over year. Adjusted revenues of $4.9 billion missed the consensus estimate by a slight margin but rose a tad on a year-over-year basis.

How is FI Doing?

Fiserv banks on acquisitions to expand its product portfolio. In 2023, the company acquired Skytef and Sled for $17 million, which would help increase the company's distribution network, point-of-sale (POS) and direct payment services.

In 2022, FI acquired Finxact, which improved Fiserv’s digital banking strategy to offer smooth and bespoke digital banking experiences to its clients. The company also acquired OrangeData (Yacaré), NexTable and City POS in 2022. These buyouts have boosted Fiserv’s acceptance segment.

FI’s business model couples the recurring revenues and high incremental margins of a scaled processing business with higher growth and margins. Moreover, it remains constant in providing cloud-based software and service offerings. Therefore, we anticipate the company’s adjusted revenues to grow 6.9%, 8.1% and 7.5% in 2024, 2025 and 2026, respectively.

Fiserv's current ratio (a measure of liquidity) at the end of third-quarter 2024 was pegged at 1.07, higher than the 1.06 reported in the preceding quarter. A current ratio of more than 1 indicates that the company will pay off short-term obligations efficiently.

In 2023, 2022 and 2021, Fiserv repurchased 40 million, 25.4 million and 23.3 million shares for $4.7 billion, $2.50 billion and $2.57 billion, respectively. Such actions instill investors’ confidence and drive the bottom line.

Risk Factors for Fiserv

Fiserv’s core banking products and services are part of a fiercely competitive market. The industry is becoming even more competitive with the entry of several non-banking bodies, such as internal data processing departments and data processing affiliates of large companies.

The company’s acquisition policy results in some integration risks. Buyouts can affect FI’s balance sheet in the form of goodwill and intangible assets. Moreover, frequent acquisitions create distractions for management, thus impacting organic growth.

FI’s Zacks Rank & Stocks to Consider

Fiserv Industries carries a Zacks Rank #3 (Hold) at present.

Some better-ranked stocks in the broader Zacks Business Services sector are RB Global, Inc. RBA and Verisk Analytics VRSK.

RB Global has a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

RBA has a long-term earnings growth expectation of 10.6%. It delivered a trailing four-quarter earnings surprise of 16.3%, on average.

Verisk Analytics carries a Zacks Rank of 2 at present. It has a long-term earnings growth expectation of 12%.

VRSK delivered a trailing four-quarter earnings surprise of 4.2%, on average.

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