What: Shares of Fidelity National Information Services (FIS 0.81%), a provider of banking and payments solutions, slumped on Tuesday following the company's third-quarter earnings report. At 2:30 p.m. Tuesday, the stock was down about 12%.
So what: Fidelity reported quarterly revenue of $1.58 billion, down 2% year over year, but up 3% adjusting for currency. Revenue missed analyst expectations by about $60 million. The Integrated Financial Solutions segment grew revenue by 1% year over year to $971 million, while the Global Financial Solutions segment shrunk by 5% to $609 million.
Non-GAAP earnings came in at $0.90 per share, up from $0.80 per share during the same period last year, but a penny short of the average analyst estimate. On a GAAP basis, EPS from continuing operations was $0.62, up 17% year over year.
While Fidelity's operating expenses increased year over year, gross margin improved to 35.3%, up from 33.1% during the third quarter of 2014. Despite the revenue decrease, this improvement drove the company's earnings higher -- although not quite as high as analysts predicted.
Now what: "In a difficult macro-economic environment, we delivered earnings growth in-line with our expectations," said CEO Gary Norcross. "Additionally, our announced strategic acquisition of SunGard, combining our global delivery scale and proven track record of integrating acquired assets, clearly aligns with our long-term growth and performance goals, and we believe this will be a long-term value creator for FIS."
Shares of Fidelity have more than doubled over the past three years, driven by strong earnings growth. Fidelity's strategy, as described by Norcross, is highly acquisitive, and the company spent $566 million on acquisitions during the past 12 months alone, not including the $5.1 billion acquisition of SunGard announced in August. While Fidelity's third-quarter earnings barely missed the mark, flattish revenue and slowing earnings growth could be spooking investors.
