Fidelity National Earnings: Some Near-Term Issues Arise

Fidelity National Information Service's fourth-quarter results were solid overall, but revenue growth in the banking segment and free cash flow conversion came in a bit soft, and management pointed to some of these issues potentially stretching into the first quarter. While these issues bear watching, in our view, they do not have a material impact on our long-term view. We will maintain our $88 fair value estimate for the narrow-moat company. However, we think the market is very sensitive to any negative surprises given the recent history of the company, and the strong negative reaction has pushed the shares into undervalued territory.