A bevy of bank technology companies reported higher quarterly earnings, news that helped support their stocks in the face of an overall market downturn last week.
The mostly positive earnings reports from financial technology companies came in the midst of a general market slide sparked by Congressional testimony from Federal Reserve Chairman Alan Greenspan, who hinted at the possibility of the central bank increasing interest rates again later this year.
A number systems suppliers with significant business from banks reported generally higher quarterly earnings. In most cases, their results matched or slightly exceeded analysts expectations for the quarter ended June 30.
But one software firm, Fair, Isaac & Co., reported a strong quarterly earnings increase that caught some on Wall Street by surprise. The San Rafael, Calif.-based developer of credit-scoring systems reported net income of $2.6 million, or 41 cents a share, for its third fiscal 1994 quarter ended June 30.
Income Exceeds Estimates
The quarter's earnings exceeded an analyst's consensus estimates of 31 cents a share, according to First Call Corp., a unit of Thomson Corp., which also owns the American Banker.
Fair Isaac's profits for the period increased 88% relative to the $1.4 million, or 22 cents per share, the company posted in the same period a year ago.
Earnings for the year to date rose 91 percent, to $7.0 million, or $1.13 per share, from $3.7 million, or 61 cents per share, for the first nine months of fiscal 1993.
Third-quarter revenues of $22.6 million increased 26 percent when compared with the year-ago period, while nine-month comparisons showed a gain of 40 percent, from $46.3 million in 1993 to $64.8 million for the first nine months of fiscal 1994.
Fair, Isaac president and chief executive Larry Rosenberger said that sales of credit scoring and account management services distributed through credit bureaus and credit card processing agencies continued to exceed management's expectations.
"In an industry as intensely competitive as the consumer credit, any product or service that offers issuers a leg up - a reasonable expectation of improving direct marketing response rates, reducing credit losses, or improving overall returns on their portfolios - is going to attract substantial interest," he said.
Mr. Rosenberger said that Fair Isaac's higher margins partly reflected the deferral of research and development and internal development projects while the company "concentrated on meeting customer demands." Results in subsequent periods will reflect significant increases in staffing, computer capacity, and physical plant, he noted.
Shares Down for Week
Fair Isaac's stock closed at $32.125 Friday, down $1.375 for the week, a decline that followed a $4.50 rise in the firm's shares the previous week.
Automated teller machine maker Diebold Inc. reported that its second-quarter profits rose 36% from the year-earlier period, to $16.2 million. Net income reached 53 cents per share, compared with analysts' consensus of 50 cents per share, according to First Call.
For the six months ended June 30, Diebold had net income of $28.9 million or revenues of $364.8 million.
"We finished another strong quarter of strong orders, with continuing improvement in both our domestic and international business," said Robert W. Mahoney, Diebold's chairman and chief executive. "Despite the highest shipment quarter in the company's history, our backlog of product orders grew again in the second quarter, providing a good start for the second half of the year."
Diebold's common stock closed at $43.75 a share Friday, unchanged for the week.
Another maker of banking-specific hardware and software, Dallas-based Banctec Inc. reported revenues of $ 69.5 million for the first quarter of fiscal year 1995 ended June 26, 1994, compared with $54.9 million for the same period last year.
Banctec's Profits Up
Net income increased to $3.7 million or 33 cents per share, compared to $3.3 million or $.30 per share in the first quarter of the prior year. First Call's analyst estimates averaged 31 cents a share for the period.
Grahame N. Clark Jr., chairman and chief executive, said: "Revenues increased 27% compared to last year's first quarter, reflecting both the new businesses acquired during the past year and the continued growth in the company's network services business."
Gross profit rose by 36 percent and was offset in part by increased operating expenses and interest expense related to the new businesses.
"During the past year, Banetec invested significant resources to acquire five companies that specialize in integrated banking software, document imaging, systems integration, and electronic funds transfer software applications," Mr. Clark said. "During the first quarter of fiscal 1995, we completed the process of integrating these new companies into our existing business units."
Banctec's stock price closed at $20 a share Friday, down $1.125 for the week.
Alltel Earnings Up
Little Rock, Ark.-based Alltel Corp. - the parent of bank outsourcing and software firm Systematics Information Services Inc. - reported second-quarter earnings of $76.2 million, versus $63.8 million in profits for the same period in 1993. Earnings per share for the quarter hit 40 cents, just slightly ahead of analysts' predictions of 39 cents a share.
Systematics contributed $215.4 million in revenues to Alltel's $734.6 million in total sales for the quarter. The outsourcing unit reported $34.4 million in operating income for the quarter, up 15% from the year-earlier period.
"Information services recorded another quarter of strong sales with operating income also returning double-digit growth levels as margins continue to improve on the surge of new contracts signed in recent quarters," said Joe Ford, Alltel's chairman and chief executive.
Alltel's stock closed at $25.75 a share Friday, up 50 cents for the week.
Improvement at Jack Henry
Community banking software supplier Jack Henry & Associates Inc. announced improved results for its fiscal fourth quarter ended June 30. Net income for the period was $1.9 million, or 15 cents per share, compared with $1.6 million, or 13 cents per share, for the year-earlier period.
Officials at the Monett, Mo.-based Jack Henry said revenues reached of $10.2 million for the quarter, up from $9.5 million in the same period in 1993.
The company's stock price closed at $9.125 a share Friday, up $0.125 for the week.
[Tabular Data Omitted]