Fiserv beat estimates, on adjusted EPS of 1.13 vs. consensus of 1.08, and guided FY11 EPS towards the top of range. Adjusted earnings per share from continuing operations for the first six months of 2011 were up 10 percent to $2.15 compared with $1.95 in 2010. GAAP earnings per share from continuing operations for the second quarter of 2011 was $0.67, which included a loss from early debt extinguishment of $0.26 per share, compared with $0.85 in 2010. GAAP earnings per share from continuing operations for the first six months of 2011 was $1.45, which included a loss from early debt extinguishment and severance expenses of $0.34 per share, compared with $1.65 in 2010.
Management was particularly bullish on Q4 2011 and FY 2012 because sales of existing products have been strong, and increasing regulatory clarity in the banking sector might lead to increased capital spending. CEO Jeff Yabuki was excited by the sales trends, "our highly valued and differentiated solutions led us to record the largest quarterly sales attainment in the company's history." He also commented on the regulatory environment, “The big regulatory news in the quarter was the fed's finalization of Durbin. While Durbin will negatively impact debit interchange revenue for larger institutions, albeit at a level better than originally signaled, the fed did confirm the creation of a 2-tier interchange system that will exempt debt issuers with less than $10 billion in assets from the interchange caps. We view this as positive for our business in the near and the mid-term.”
JP Morgan and Goldman Sachs have raised their target price to $67, but remain neutral. Oppenheimer reiterated its outperform call with a target price of $72, which mirrors UASBIG’s target of $72.49. On the day, FISV was flat, while the overall market declined more than 2%. UASBIG’s cost basis is 62.13, or 1% above today’s market price of 61.45.
An updated target price will be posted within 7 days.
-Zach
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