FIS targets $500 million in cost cuts

The Jacksonville-based company reports disappointing earnings after opening its new headquarters.

  • By Mark Basch
  • | 12:10 a.m. November 10, 2022
  • | 5 Free Articles Remaining!
The new Fidelity National Information Services Inc. headquarters in Brooklyn. FIS stock plummeted after its third-quarter earnings report, falling as much as $22.94 to a six-year low of $56.53.
The new Fidelity National Information Services Inc. headquarters in Brooklyn. FIS stock plummeted after its third-quarter earnings report, falling as much as $22.94 to a six-year low of $56.53.
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Less than a month after opening its new $156 million headquarters building – and naming a new CEO – Fidelity National Information Services Inc. reported disappointing earnings and said it is looking to cut $500 million in expenses.

The financial technology company known as FIS reported adjusted third-quarter earnings of $1.74 a share, a penny higher than last year but a penny below the average analyst’s forecast, according to Zacks Investment Research.

FIS also lowered its earnings forecast for all of 2022 from a range of $7 to $7.10 a share to $6.60 to $6.66.

“We are not satisfied with our results,” incoming CEO Stephanie Ferris said in a Nov. 3 conference call with analysts.

FIS President Ferris, who will succeed Gary Norcross as CEO on Jan. 1, said it was a “challenging” quarter.

“Given the changing macro environment, the persistence of inflationary cost pressures and the resulting impacts to margin and free cash flow, we are taking immediate action to permanently reduce the cost structure of the company via our enterprise transformation program,” she said.

“We have begun to take immediate actions towards this transformation program. Detailed planning is underway and our early expectations are to deliver at least $500 million of cash savings with additional upside to be determined as we go through the planning process.”

The company is not yet announcing details of the program but Ferris said it includes looking at “rightsizing” its workforce.

FIS has about 65,000 employees in 120 global locations.

The company opened its 12-story riverfront headquarters at 347 Riverside Ave. in Jacksonville on Oct. 12.

FIS promised to add 500 jobs to its 1,216 workers in Jacksonville when it announced plans for the building in 2019. At its Oct. 12 ribbon-cutting ceremony, Norcross said the company is 75% of the way toward achieving that job creation goal.

The company announced Oct. 18 that Ferris would become chief executive.

The stock plummeted after the earnings report, falling as much as $22.94 to a six-year low of $56.53.

Oppenheimer & Co. analyst Dominick Gabriele lowered his rating on FIS from “outperform” to “perform” after the report.

“FIS is going through a transition which takes time. It is a structurally slower growing, lower profitability business versus peers with more international exposure and thus hurt more by FX (foreign exchange) and inflation costs, making margin more vulnerable,” Gabriele said in his research note.

“Cost cuts are a temporary fix, and slower than market peer growth likely reignites market share loss conversations and investment needs, while banking growth slows,” he said.

Wolfe Research analyst Darrin Peller said the stock was “probably” oversold but he downgraded the shares from “outperform” to “peer perform” even after the big drop.

“Coupled with a strategy pivot and new restructuring plan, we suspect shares remain range bound pending clarity on EPS stability,” Peller said in his note.

Black Knight earnings down slightly

Mortgage technology company Black Knight Inc. reported lower third-quarter earnings as rising interest rates affected its home lending clients.

Adjusted earnings of 56 cents a share were 4 cents lower than last year, while revenue rose 2% to $386.7 million.

“While the operating environment has created some near-term headwinds to our financial performance, we believe our third quarter results demonstrate the resilience of our business model,” Executive Chairman Anthony Jabbour said in a news release.

Jacksonville-based Black Knight did not have a conference call because it agreed in May to a buyout by International Exchange Inc.

New York-based ICE operates the New York Stock Exchange and also has a large mortgage technology business, so the proposed merger is facing a long antitrust review by the Federal Trade Commission.

In its quarterly conference call Nov. 3, ICE Chief Executive Jeffrey Sprecher said the company has provided extensive information to the FTC.

“And as is often customary, we agreed to extend the FTC’s statutory review period and intend to continue ICE’s cooperation with the FTC staff,” he said, according to a company transcript of the call.

Sprecher defended the rationale for the acquisition.

“ICE plans a significant financial outlay to open and upgrade the Black Knight technology stack, a commitment that we believe would have been hard for Black Knight’s other potential acquirers to make potentially in a contracting mortgage environment,” he said.

Dun & Bradstreet earnings unchanged

Dun & Bradstreet Holdings Inc. reported adjusted third-quarter earnings of $123.4 million, or 29 cents a share, equal to its earnings in the third quarter of 2021.

The Jacksonville-based business data firm said revenue rose 2.7% to $556.3 million.

“Our results demonstrate the strength and resilience of our business fundamentals, as we continue to achieve defensible growth despite a challenging macro environment,” Dun & Bradstreet CEO Jabbour said in a news release.

Black Knight is an investor in Dun & Bradstreet and Jabbour holds executive roles with both companies.

Regency Centers optimistic despite lower earnings

Regency Centers Corp. reported lower third-quarter earnings, but CEO Lisa Palmer expects the Jacksonville-based shopping center developer to outperform competitors in the sluggish economy.

Regency reported funds from operations (mainly earnings excluding noncash charges) of $1.01 a share, 11 cents lower than the previous year, with net income falling by 18 cents to 51 cents a share.

“It is through a lens of what I would characterize as cautious optimism that we look ahead and we remain confident that we are uniquely positioned to outperform,” Palmer said in a Nov. 4 conference call.

“The demographic profile of our portfolio provides greater cushion for inflationary impacts to be absorbed by consumers and for spending to continue through a softer economic environment,” she said.

Regency’s portfolio of 404 properties across the country, mainly grocery-anchored shopping centers, was 94.6% leased as of Sept. 30.

“Our dense suburban trade areas also continue to benefit from structural tailwinds stemming from post-pandemic migration patterns and hybrid work, but also by a renewed appreciation for the value of brick-and-mortar retailing,” Palmer said.

Firehouse sales lag other RBI chains

Sales growth at Firehouse Subs restaurants continues to lag behind the other three restaurant chains owned by Restaurant Brands International Inc. 

RBI reported Nov. 3 that its Burger King, Popeyes and Tim Hortons chains grew by 14% in the third quarter but Firehouse sales rose by just 3.8% to $289 million.

Sales at restaurants operated by the three other brands for more than a year rose 9.1% but Firehouse comparable sales were flat.

Toronto-based RBI acquired Firehouse in December 2021.

“We’re just getting started with Firehouse, which we believe will be an exciting long-term contributor to net restaurant growth and overall systemwide sales growth here domestically as well as internationally,” RBI Chief Executive Jose Cil said in the company’s quarterly conference call.

But the company gave few details on Firehouse, which is by far the smallest of RBI’s four brands. 

The three other brands combined for more than $10 billion in third-quarter sales.

RYAM reports profit as sales jump 25%

Rayonier Advanced Materials Inc. reported income from continuing operations of 28 cents a share in the third quarter. 

That’s only the third time since 2018 that the Jacksonville-based maker of cellulose specialty products recorded a profit from continuing operations.

Sales rose 25% to $466 million.

“Increased productivity in the third quarter led to higher sales volumes in high purity cellulose and stronger financial results,” CEO De Lyle Bloomquist said in a Nov. 1 news release.

“Though the global economy appears to be slowing, we remain optimistic about capturing additional productivity gains and value for our key products,” he said.

Rayonier earnings fall in third quarter

Timber and real estate company Rayonier Inc. reported adjusted third-quarter earnings of 15 cents a share, down from 35 cents last year.

Rayonier, headquartered in Wildlight in Nassau County, said timber earnings rose but its real estate earnings fell because of strong results the prior year.

“We are encouraged by our third quarter results, particularly given the challenges presented by ongoing cost pressures, the recent slowdown in the U.S. housing market, and continued headwinds in China as it relates to our export business,” CEO David Nunes said in a news release.

Rayonier, which had 2.7 million acres of timber as of Sept. 30, also announced agreements to acquire 172,400 acres of timberland in Texas, Georgia, Alabama and Louisiana for $474 million.

Rayonier and RYAM split into separate companies in 2014.

Dream Finders Homes says it’s on track

Dream Finders Homes Inc.’s third-quarter results were affected by the overall economy and by Hurricane Ian.

However, the Jacksonville-based homebuilder said it is still on track to meet its home sales target for the year.

“Despite the shifting macroeconomic narrative and factors outside of our control, such as the most recent hurricane, we note that the national shortage of homes continues,” CEO Patrick Zalupski said in a Nov. 3 news release.

“We are confident our current positioning in the housing universe remains attractive as a destination for entry-level and first-time move-up buyers, strategically complemented by our build-for-rent platform, which is less susceptible to fluctuations in homebuyer demand,” he said.

Homebuilding revenue more than doubled to $784 million, because of a large acquisition of a Texas company in the fourth quarter last year. However, Hurricane Ian delayed an estimated $74 million in home closings in some markets.

Earnings more than tripled to 64 cents a share.

Dream Finders closed on the sale of 4,562 homes in the first nine months of 2022 and reaffirmed its guidance that it will close at least 7,000 for the full year.

Publix stock drops despite earnings rise

Publix Super Markets Inc. reported adjusted earnings rose by 1 penny to 24 cents a share in the third quarter.

Total sales rose 9.2% to $13 billion and sales at stores open more than one year rose 7.6%.

The Lakeland-based supermarket chain said its stock price fell from $13.84 on Aug. 1 to $13.19 on Nov. 1.

The stock is not publicly traded and is made available for sale only to employees. The price is determined by an appraisal five times a year.

Margo Caribe earnings fall

Jacksonville-based Margo Caribe Inc. said third-quarter revenue fell 5% to $10.2 million and earnings fell to 6 cents a share, from 22 cents the previous year.

Margo Caribe produces home and garden products through subsidiary Margo Outdoor Living Inc.

The company said in an Oct. 31 news release that operating margins were impacted by increases in labor costs, sea freight rates and diesel fuel prices.



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