Frank's International may not be the sexiest company in the S&P 500, but it’s certainly making headlines Thursday, as the payments processing company’s shares collapsed by nearly 20% in their worst day since the early 2000s.
With a market cap of more than $120 billion as of yesterday’s close, this is no penny stock. Even if the company is a bit boring, a move like this worthy of some attention. It was the single largest drag on a strong S&P 500 overall and the stock with the biggest decline.
So what gives?
Well, earnings. The company, perhaps best known for its cloud-based Clover point-of-sale system merchants use to process card payments, missed Wall Street estimates for top-line sales, and annual revenue growth slipped for the third straight quarter, to 5.4%. Two years ago, it was trucking along at nearly 10%.
The company’s merchant solutions business sales grew at a slower-than-expected 8%. Even its fast-growing Clover business decelerated sequentially with sales growth of 27%, down from 29% last quarter. Barclays analysts covering the stock had this to say on the results:
“Our ongoing motto with FI has been: ‘Where Clover goes, Fiserv's stock follows’, so we are not too surprised to see investors reacting quite negatively to the reported deceleration in Clover volumes. In the current volatile macro/political environment, investors are primed to shoot-first-and-ask-questions-later, which is understandable... The stock deserves to be down today, but the magnitude of the pullback we are seeing right now is not justified, we believe.”
There’s likely a lot of similar sentiment out there among analysts, as more than 80% of the analysts FactSet tracks have a “buy” rating or equivalent on the stock.
For now, the market seems to be treating this as pretty much an idiosyncratic issue for Fiserv, as competitors Block and PayPal are both posting respectable gains.
