Fiserv Inc. topped Wall Street's earnings expectations in the second quarter and raised its projections for the year but said revenue would take a hit in 2006 from the expected loss of three outsourcing customers.
The financial technology vendor was also downgraded Friday by an analyst who said its revenue growth could slow.
Fiserv, of Brookfield, Wis., reported an increase in software sales in the first half and continued strength in its outsourcing business.
Leslie M. Muma, its president and chief executive, told analysts in a conference call Friday, "We've seen a pickup in spending in the midsized and community bank segments."
Net income for the quarter was $114 million, 20% more than a year earlier. Revenue for processing and services rose 10%, to $913.1 million. Total revenue, which included $83 million in customer reimbursements, was $996 million, up 8.3%. Per-share earnings were 59 cents, beating analysts' expectations by 5 cents.
Fiserv raised its full-year guidance. It had forecast per-share earnings of $2.19 to $2.23 and now projects $2.24 to $2.28. (Both projections exclude gains of 14 cents a share from the sale of investments.)
For the current quarter Fiserv projected earnings of 53 to 56 cents a share, on processing and services revenues of $905 million to $925 million.
Fiserv said first-half revenue in its financial segment rose 6%, versus 2% last year. It expects mid-single-digit second-half revenue growth in its financial and investment segments and upper-single-digit growth in its health segment.
Fiserv, which repurchased 6.5 million shares of its common stock in the first half, said its board has authorized the repurchase of an additional 10 million shares.
Mr. Muma said he expects to lose three financial services outsourcing customers, which could mean $40 million of lost revenue in 2006. One of the customers is being acquired and the others are taking their work in-house, though one of those two will continue to use Fiserv software. Mr. Muma did not name the three companies.
David A. Trossman of Wachovia Securities Inc. downgraded Fiserv shares to "market perform" from "outperform." It continues to post respectable results but may have reached its revenue-growth peak.
"Fiserv's bank processing business had a great quarter with organic revenue growth accelerating," he wrote, but "we do not anticipate organic growth getting much better."
