First Data Corp (NYSE:FDC) met earnings estimates. The payment processing firm, once a slow-growth entity, has seen an increase in business due to international expansion, more cashless customers and the growing popularity of online buying. As revenue rises and business expands, FDC stock looks poised to enjoy increased growth.
FDC Met Earnings and Exceeded Growth
The Atlanta-based payment processor met earnings estimates as it reported a Q4 2017 of 44 cents per share, a 13% increase over last year. Its quarterly revenues of $1.95 billion beat estimates by $10 million, improving by 6.6% over revenues in 4Q 2016.
For all of 2017, the company earned $1.52 per share, up 15% over 2016. Revenues for the year were $7.428 billion a 4% increase.
This growth has helped to turn First Data around. After seeing years of losses, the company turned a profit in 2016. Today, First Data stock trades at a 21 price-to-earnings (PE) ratio. With profit growth continuing, estimates place its forward PE at about 10. It’s this type of growth that makes FDC stock a backdoor e-commerce play.
Still, the company will need to make itself better known. When Americans think of credit or debit cards, they think of firms such as Visa Inc (NYSE:V), Mastercard Inc (NYSE:MA), American Express Company (NYSE:AXP), and Discovery Financial Services (NYSE:DFS) and not First Data.
And even with payment processing itself, PayPal Holdings Inc (NASDAQ:PYPL) enjoys better name recognition.
FDC S Is Moving Toward Higher Growth
However, FDC and its payment processing peers play an important role in the overall economy. First Data processes an estimated 45% of all point of sale credit card transactions, and they also handle many prepaid gift cards as well.
Among their most notable client for gift cards is Starbucks Corporation (NASDAQ:SBUX). They also provide technology for Apple Inc. (NASDAQ:AAPL) and their Apple Pay app.
The company has existed since 1971. Once a part of American Express, it spun off and went public in 1992. The company was again taken private when the company now known as KKR & Co. L.P. (NYSE:KKR) acquired First Data. The company went public again in 2015 when the company issued 160 million shares to pay down debt.
For much of its history, FDC stock fit the stereotype of a slow-growth financial equity. Annual revenue growth has averaged just under 1.6% per year over the last five years. However, analysts expect revenue will grow by 6% in fiscal 2018, well above previous rates.
First Data has pursued more clients outside of the United States. It also has made key acquisitions by buying CardConnect Corp (NASDAQ:FNTCU), Acculynk, and BluePay as well as partnerships to deepen its involvement in e-commerce.
They also have allied with Alipay, a Chinese online payment platform. First Data will power Alipay in North America. This goes far in deepening involvement in online payment processing.
While Americans typically associate online payments with PayPal, services such as those offered by First Data can make more sense for larger or high-growth businesses.
Final Thoughts on FDC stock
FDC stock also looks like an appealing investment with the growth of e-commerce and moves to a cashless society. The company provides the credit card processing services that make use of one’s Visa or Mastercard possible. First Data stock met earnings estimates this past quarter. The company also reported increased growth in earnings and revenue.
This growth shows that FDC has profited from the economy’s increased reliance on credit and debit cards. It has also made alliances with the likes of Apple and Alipay. The company has also begun to acquire competitors that can enhance its offerings.
While growth remains unlikely to catch up to the trendier names in American business, FDC stock shows itself as a low-profile player that can benefit from e-commerce and the trend toward cashless transactions.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.
