UPDATE 2-FIS profit beats, revenue falls short of estimates

* Q3 adj EPS cont ops $0.52 vs est $0.51

* Q3 adj rev rises 3.3 pct to $1.29 bln

* Sees FY adj EPS from cont ops $1.95-$1.99

* Explores sale of item processing svcs in Brazil

* Shares fall as much as 3 pct
(Recasts, adds conference call details, analyst comment)

By Brenton Cordeiro

BANGALORE, Oct 26 (BestGrowthStock) – Fidelity National Information
Services Inc’s (FIS.N: ) quarterly profit beat estimates but
revenue narrowly missed as its Payment Solutions business
continued its downward trend, pulling its shares down 3
percent.

The payment processor said it was exploring strategic
alternatives for its item processing and remittance services
unit in Brazil, including a possible sale of the unit.

“Payments revenue was disappointing. But I was happy to see
financial solutions revenue grow so fast, that bodes well for
the whole sector,” said analyst John Kraft of D.A. Davidson.

The company said its financial solutions segment saw a 10.5
percent growth during the July-September quarter driven by
growth in professional services, software license sales and
account processing revenue, but its key Payment Solutions
revenue fell about 2 percent.

(See graphic: http://r.reuters.com/xan32q)

Companies in the sector have been posting sluggish growth
as financial institutions tightened their IT spending during
the credit crunch. However, a turnaround in the economy could
result in financial companies loosening their purse-strings —
something companies like FIS have been eagerly awaiting.
“We are seeing renewed spending in the market and are
increasingly optimistic about the momentum as we head into the
fourth quarter and 2011,” Chief Financial Officer Michael
Hayford told on a conference call.

CAPCO BOOST

Earlier this month, FIS said it would buy Belgium-based
Capco for $292 million in cash, adding a financial services
consulting business to its offerings. [ID:nSGE69I0GO]

“We expect their (Capco’s) growth to be higher than the
corporate FIS’ organic growth,” CFO Hayford said on a
post-earnings call.

The company said Capco would give boost to its organic
revenue growth and slightly add to earnings in 2011.

“(The deal) is a way to expand with bigger banks and with
international banks — two areas that Capco has focus,” analyst
Kraft said.

For 2010, FIS expects adjusted revenue growth to be at the
high end of its forecast range of 1 to 3 percent in constant
currency.

Earnings from continuing operations, on a pro forma basis,
are seen at $1.95-$1.99 per share, FIS said.

The company also forecast that its international business
revenue — that grew 2.3 percent in the third quarter — would
record double-digit growth beginning in the fourth quarter.

Payment processors like Fiserv (FISV.O: ), FIS, and Jack
Henry & Associates (JKHY.O: ) primarily provide IT services and
systems that enable banks and financial companies to carry out
day-to-day operations.

FIS has been in the news lately following a reported failed
takeover attempt by a consortium led by Blackstone Group LP
(BX.N: ) in May.

Following this, the company authorized a leveraged
recapitalization plan and repurchased about $2.5 billion of its
common stock. [ID:nSGE6730L9]

For the latest third quarter, FIS’ net income rose to 110.4
million, or 33 cents a share, from 67.6 million, or 35 cents a
share, last year.

Adjusted profit from continuing operations was 52 cents a
share, the S&P 500 component said in a statement.

Adjusted revenue at the Jacksonville, Florida-based company
rose about 3.3 percent to $1.29 billion.

Analysts had expected a profit of 51 cents a share, on
revenue of $1.3 billion, according to Thomson Reuters I/B/E/S.

FIS shares, which have risen about 3 percent since the
company reported second-quarter results in July, were down 31
cents at $28.51 in late morning trade Tuesday on the New York
Stock Exchange.
(Reporting by Brenton Cordeiro; Editing by Gopakumar Warrier)

UPDATE 2-FIS profit beats, revenue falls short of estimates