Fiserv’s Q3 Earnings Disappoint Analysts
Fiserv, a key player in the bank technology sector, reported a disappointing third-quarter earnings that surprised analysts. The company has been experiencing a transitional period due to management changes, but the extent of the financial challenges it’s facing was unexpected. As per a research note by KBW analysts, “While a reset was expected, the magnitude of the miss and outlook is significantly worse than expected.”
For the quarter ending on September 30, Fiserv’s earnings were recorded at $2.04 per share, falling short of the analysts’ estimate of $2.64 as reported by the London Stock Exchange. While the revenue was up by 1% from the previous year, reaching $4.92 billion, it was still below the $5.36 billion that analysts had anticipated. The company’s profit increased to $792 million, up from $564 million, and it expects an earnings per share (EPS) of $8.50 to $8.60 for the full year, down from its earlier forecast of $10.15 to $10.30. Revenue is anticipated to grow by 3.5% to 4%, a substantial drop from the previous 10% projection.
Analysts at Jefferies noted, “The magnitude of the 3Q miss and guidance cut for FY25 is difficult to comprehend.” However, the company is determined to make improvements. CEO Mike Lyons stated, “Our current performance is not where we want it to be nor where our stakeholders expect it to be,” indicating that the measures being undertaken are the result of a detailed analysis of the company.
New Leadership at Fiserv
Mike Lyons took over as CEO of Fiserv in February, succeeding Frank Bisignano, the former CEO of Fiserv and First Data. Bisignano has since joined the Trump administration as head of the Social Security Administration and CEO of the Internal Revenue Service.
Fiserv also announced the appointment of Paul Todd as CFO, Takis Georgakopoulos as COO, and Dhivya Suryadevara as co-president. Furthermore, Gordon Nixon, Céline Dufétel, and Gary Shedlin have been added to its board. Nixon will replace Doyle Simons as the independent chairman of the board, and Shedlin will become the chair of Fiserv’s audit committee.
“Clearly some competitors are taking core business away from Fiserv, suggesting that newer technology is needed,” stated Aaron McPherson, principal at AFM Consulting. “The problem is that existing customers don’t want to move, and forcing them to move opens up a competitive opportunity for newer competitors.”
Fiserv’s Strategic Moves
In terms of strategic moves, Fiserv announced One Fiserv, a plan to restructure the company. It also announced plans to transfer its stock listing from the New York Stock Exchange to Nasdaq effective from November 11. The company, which processes more than 90 billion transactions each year for over 10,000 financial institution clients and 6 million merchant locations, has been planning to launch a stablecoin and a digital asset platform.
Fiserv also aims to invest in developing new forms of AI, a measure that is increasingly being adopted by large bank technology firms to enhance transaction processing, marketing, product development, and other functions.
Analysts’ Take on Fiserv’s Performance
Fiserv’s stock was down about 40% in midday trading on Wednesday, and it is down about 63% for the year. The company faces stiff competition from bank technology firms like FIS and payment technology companies including Global Payments and Adyen. It also faces pressure from technology companies like Block, PayPal, and Stripe that process payments for small businesses.
Analysts at William Blair noted, “We encourage investors to refocus long-term fintech investments on better-positioned names with greater financial visibility and management credibility,” adding that they could no longer recommend Fiserv’s stock. William Blair analysts were perplexed by the deceleration in the organic revenue growth and suggested that “this performance suggests to us that management took its eye off the ball at some point earlier this year.”
Analysts believe that Fiserv’s disappointing results and the resulting shake in investor confidence could turn the company into a multi-quarter turnaround with diminished financial visibility.
Source: American Banker
