Fidelity National Information Services shares plunged after the company guided to slower fourth-quarter organic growth and said its CFO is stepping down. The third-quarter results beat expectations, but the debt from a January acquisition raises the stakes on slowing growth.
Fidelity National Information Services (FIS) plunged 24.4% today as of 2:20 p.m. EDT, after the company reported third-quarter earnings and announced a leadership change.
Q3 beat gives way to softer guidance
Fidelity grew revenue 26.8% to $3.45 billion in the third quarter, or 29.1% on an adjusted basis. Adjusted earnings per share rose 6.6% to $1.61, and both figures beat expectations.
However, much of that growth came from the acquisition of Global Payments' issuer solutions business, completed in January for $13.5 billion. Organic growth is slowing underneath.
For the full year, Fidelity projects 3.4% pro forma organic revenue growth and 3.3% adjusted EBITDA growth at the midpoint. That marks a deceleration from the third quarter's 3.7% pro forma revenue growth and 5.2% adjusted EBITDA growth.
CFO departure adds uncertainty
Fidelity also announced that CFO James Kehoe will step down. The company did not explain the reason for the departure.
Investors generally take such announcements to mean either that the executive sought better opportunities elsewhere or that operational problems still need fixing, according to The Motley Fool.
Cheaper valuation, heavier debt
After the drop, Fidelity trades at just over five times this year's adjusted earnings estimates. It also carries over $14 billion in net debt, a little less than three times this year's adjusted EBITDA.
That debt is about seven times free cash flow. The Motley Fool says the stock may be a deep-value opportunity at these levels but carries higher risks for investors.
Source: The Motley Fool
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