After the closing bell, Fiserv ($FISV) reported Q1 earnings of $1.20 per share. That was five cents better than Wall Street’s estimates.
I like this company a lot. They help financial companies with their back office IT operations. Fiserv earned $1.02 in the same quarter last year so that’s pretty good growth. Adjusted revenue rose 5% to $1.03 billion. I was pleased to see the company grow its operating margins by 40 basis points.
“We are off to a great start in 2012 with above plan performance for revenue and earnings per share in the quarter,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “There is continuing evidence that our broad range of technology solutions will support the needs of the evolving financial services market.”
The best news is that Fiserv reaffirmed its full-year guidance of $5.04 to $5.20 per share. That’s a nice increase from the $4.58 per share they made last year. Fiserv also said that it expects revenue to grow by 4% to 6% which is about what the Street was expecting. On the earnings call, the company said it expects free cash flow of $5.70 per share for 2012.
Fiserv’s stock has been on a tear lately. In October, it dipped below $50 and today it got as high as $71.74. Before today’s earnings report, I had some concerns that Fiserv’s stock may have gotten too pricey. Today’s evidence tells us that’s not the case. Using the low end of its range, the stock is going for 14 times earnings which is a good value.
The economic recovery is officially 34 months old. It’s not strong but it may last a little while longer. Today’s ISM number came in at 54.8 while Wall Street was expecting 53.0.
Here’s some context: The ISM has fallen between 54.0 and 56.0 a total of 104 times. Just three have come during official recessions.
The strong ISM caused a quick rally on Wall Street and we’re back above 1,400.
Here’s a look at how often a recession has occurred by ISM range:
Harris Corp had news-filled earnings report. Let’s start with the good news. The company reported earnings of $1.39 per share which was six cents more than expectations.
Harris also narrowed its full-year guidance by five cents at each end. The new range is $5.15 to $5.25 per share. The bad news is that they lowered their 2012 revenue guidance from $6 billion to $5.45 billion. Harris offered initial EPS guidance for 2013 of $5.10 to $5.30 which isn’t very impressive.
Harris said that it will sell its broadcast business in an effort to focus on core businesses that won’t be impacted by lower defense spending. This is a smart move since the broadcast business has been a drag on earnings for Harris.
The divestiture will result in at $407 million after tax charge to the company, which resulted in a reported loss of $255 million in the third quarter.
“The decision to divest Broadcast Communications resulted from a thorough review of our business portfolio, which determined that the business is no longer aligned with the company’s long-term strategy,” said William M. Brown, president and chief executive officer. “The plan to sell these assets supports our disciplined approach to capital allocation, and we intend to use the proceeds to return cash to shareholders and invest in growing our core businesses.”
As I’ve noted before, this has been a pretty good earnings season. More than 70% of earnings reports have topped estimates. The market, however, has largely failed to respond. The stock market slid during the first half of April. All told, $770 billion in market value was erased.
The S&P 500 slid last year to a two-year low of 11.9 times reported profit after the Fed’s second round of quantitative easing ended, Europe’s crisis intensified and American lawmakers debated raising the federal debt limit. While the gauge’s multiple has since rebounded to 14.3, it’s still below the six- decade historical average of 16.4, Bloomberg data show.
That means that the S&P 500 can rally close to 15% and still be inline with the long-term average.
Eddy Elfenbein is a Washington, DC-based speaker, portfolio manager and editor of the blog Crossing Wall Street. His Buy List has beaten the S&P 500 over the last 20 years. (more)
Eddy Elfenbein is a Washington, DC-based speaker, portfolio manager and editor of the blog Crossing Wall Street. His