In a recent SEC filing, Fiserv Inc (NYSE:FI). disclosed that it expects to record a significant non-cash impairment charge in the third quarter of 2024. The charge, estimated to be between $400 million and $600 million, pertains to the diminishing value of its equity method investment in Wells Fargo Merchant Services (WFMS), a joint venture with Wells Fargo Bank. This anticipated impairment stems from the upcoming expiration of the joint venture on April 1, 2025.
Fiserv, a global provider of financial services technology solutions, acquired its 40% stake in WFMS through the merger with First Data Corporation in 2019. As the joint venture concludes, Fiserv is set to receive a cash payment or assets commensurate with its ownership interest, as per the terms of the contractual valuation and separation process agreed upon with Wells Fargo.
The financial services firm also announced entering into a multiyear agreement with Wells Fargo to continue providing processing services for Wells Fargo's merchant clients post the joint venture's expiration. Despite the sizeable impairment charge, Fiserv reassures that there will be no material cash expenditures in the future related to this charge.
Moreover, Fiserv anticipates that the impairment will not affect the company's adjusted earnings per share for 2024, as it is a non-cash charge. The company also maintains its medium-term performance outlook for 2025 and 2026, projecting organic revenue growth of 9-12% and adjusted earnings per share growth of 14-18%.
The disclosure of this financial information is based on the company's current expectations and could be subject to change depending on the final valuation process and additional information that may arise. The SEC filing also contains forward-looking statements regarding the company's financial performance and should be considered with caution due to potential risks and uncertainties.
In other recent news, Fiserv has experienced significant developments in its financial performance and strategic initiatives. The company reported a 7% year-over-year increase in second-quarter 2024 revenue, reaching a record $5.11 billion, and a 31% increase in second-quarter earnings, leading to an upward revision of its full-year profit forecast. Fiserv also completed a public offering and issuance of senior notes totaling $1.75 billion.
On the strategic front, Fiserv expanded its partnership with PayPal (NASDAQ:PYPL) Holdings, Inc. to enhance the checkout process for U.S. merchants, streamlining the integration of PayPal and Venmo services for Fiserv's client base. Fiserv continues to focus on software and value-added services (VAS) up-selling, targeting the restaurant industry.
Analysts have responded favorably to these developments. Mizuho Securities reiterated its Outperform rating on Fiserv, maintaining a price target of $183.00. BTIG initiated coverage on Fiserv with a 'Buy' rating, citing the company's substantial investment in platform development and a promising growth outlook.
Tigress Financial Partners lifted its price target for Fiserv to $190, citing the company's continued growth and product innovation. These are among the recent developments for Fiserv.
InvestingPro Insights
As Fiserv Inc. navigates the financial implications of its joint venture's expiration and its ongoing relationship with Wells Fargo, current metrics and analyst insights from InvestingPro provide a broader investment context. Fiserv is trading at a P/E ratio of 30.43, which is considered low relative to its near-term earnings growth. This suggests that the company's stock may be undervalued given its earnings potential. Moreover, Fiserv is recognized as a prominent player in the Financial Services industry, a status that could bolster investor confidence in its ability to manage current and future challenges effectively.
InvestingPro data highlights that Fiserv has experienced a high return over the last year, with a 52.77% one-year price total return, indicating strong market performance. Additionally, the company is trading near its 52-week high, with the price at 98.48% of the peak, reflecting positive investor sentiment. These metrics, coupled with analyst predictions that Fiserv will be profitable this year, provide a compelling narrative for potential investors considering the company's stock.
For those seeking further analysis and investment guidance, InvestingPro offers additional tips on Fiserv, which can be accessed through their platform. This includes insights into the company's financial health and performance metrics that could influence investment decisions.
Note that InvestingPro has numerous other tips available, providing a comprehensive view of Fiserv's investment potential. These tips may prove invaluable for investors aiming to make informed decisions based on the latest market data and expert analysis.
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