Earnings Update: BUSE, ORI, FIS

Let’s briefly review earnings from our Value Authority companies this week.

First Busey (BUSE) reported higher-than-expected first-quarter EPS of $0.65, vs. $0.52 last year. EPS were flat from the fourth quarter of 2022. Results were a penny better than expectations.

The good news is that deposits declined only 0.2%, and the bank has excess capital of $450 million above levels to be considered well capitalized. However, keeping deposits required the bank to pay higher interest rates, and net interest income declined from the fourth quarter. BUSE compensated for this with higher wealth management fees.

Looking forward, lower margins could pressure earnings in future quarters. In addition, the company believes that economic conditions have become more difficult, so long growth could slow, and credit costs could rise. However, this is all priced into the stock, and barring a severe recession, I believe the company should earn no worse than $2.25 a share this year.

BUSE remains a solid bank whose stock got caught up in the bad perceptions of other regional banks. I am confident the shares will recover. BUSE is a buy below $21. My target is $26.

Old Republic (ORI) produced its usual solid quarter, with EPS of $0.61 vs. $0.63 last year, which was $0.07 above expectations. Total premiums declined 19%, as title insurance premiums were down 46%, as expected. However, continued strength in general insurance, with a 5.9% increase in premiums and continued strong underwriting results, helped offset this weakness. Higher investment income from higher interest rates also helped the bottom line.

In an uncertain market and economic environment, ORI remains a consistent earner and a cheap stock, with a 4% dividend yield. Buy ORI under 24. My target is $27.

Fidelity National Information Services (FIS) has shown signs of operational improvement. First-quarter EPS of $1.29, vs. $1.47 last year, was $0.09 above expectations. Revenues increased 1%, but a less-favorable revenue mix and pricing pressures hurt earnings comparisons. The good news is the company’s cost-cutting efforts have started to kick in, with $210 million out of an expected $1.25 billion in cash savings realized in the first quarter. This allowed the company to slightly raise EPS guidance for the year from $5.76 to $6.06. EPS should reach at least $6.50 a share as cost cuts continue to kick in.

Even more importantly, the company said its transaction processing for banks will not be impacted by the current crisis. Management noted that while deposits are falling, total accounts are not changed. The company’s customer base is also well balanced, with no customer accounting for more than 1% of total revenue.

FIS has bounced nicely off its lows, and I think the worst is over for the shares. Buy FIS under $60. My target is $72.