Fiserv earnings missed by $0.61, revenue fell short of estimates
Investing.com -- Fiserv Inc (NYSE:FI) shares tumbled more than 45% at the open on Wednesday after the payments and financial technology provider reported third-quarter earnings that significantly missed analyst expectations and slashed its full-year outlook.
The company reported adjusted earnings of $2.04 per share for the third quarter, falling far short of the $2.65 analysts had expected. Revenue came in at $4.92 billion, below the consensus estimate of $5.36 billion.
Organic revenue growth was just 1% in the quarter, with the Merchant Solutions segment growing 5% while the Financial Solutions segment declined 3%.
In response to the disappointing results, Fiserv drastically cut its full-year guidance, now expecting adjusted earnings per share of $8.50 to $8.60, well below its previous outlook and the analyst consensus of $10.16. The company also reduced its organic revenue growth forecast to 3.5-4% for the year.
"Our current performance is not where we want it to be nor where our stakeholders expect it to be," said Mike Lyons, Chief Executive Officer of Fiserv. "With the actions being announced today, Fiserv will be better positioned to drive sustainable, high-quality growth and reach our full potential."
The company also announced significant leadership changes, including the appointment of Takis Georgakopoulos and Dhivya Suryadevara as Co-Presidents effective December 1, and Paul Todd as Chief Financial Officer. Additionally, Fiserv unveiled a "One Fiserv" action plan focused on enhancing client focus and building on the company’s strengths.
For the quarter, GAAP revenue increased just 1% YoY to $5.26 billion, while GAAP earnings per share rose 49% to $1.46. The company’s adjusted operating margin declined to 37.0% from 40.2% in the same quarter last year.
"Along with today’s guidance reset, we have launched One Fiserv, an action plan focused on the pillars that have long distinguished the company, including great client service, value-added technology solutions and leading innovation," Lyons added.
The company also announced plans to transfer its stock listing from the New York Stock Exchange to Nasdaq on November 11, where it will trade under its original ticker symbol "FISV."
William Blair analysts said in a note following the report that they "encourage investors to refocus long-term fintech investments on better-positioned names with greater financial visibility and management credibility."
"We find Fiserv’s third-quarter results difficult to explain and harder to defend, particularly considering the recent CEO transition and today’s announced CFO departure," wrote the firm. "We are perplexed by a 4.5-point sequential merchant organic revenue growth deceleration and a roughly 10-point financial solutions segment revenue deceleration.
"This performance suggests to us that management took its eye off the ball at some point earlier this year.”