Fidelity National Information Services (FIS) reported third quarter earnings yesterday — the first report in which they classified WorldPay, of which they will sell 55% next year, as a non-continuing operation. It was a complicated report, but I think I can make the basics understandable.

The good news is that there seems to be some improvement in continuing operations, with organic revenue growth of 4% and operating margins expanding 70 basis points. The company’s cost-cutting plan has really started to kick in. Results were at the high end of the company’s guidance, but higher interest expense cut into their profitability, as the company has a lot of variable-rate debt.  EPS from continuing operations declined to $0.94 from $1.01.

The company will receive $18.5 billion for that majority interest in WorldPay when the deal closes in the first quarter of 2024. At least $3.5 billion of this will go to repurchase stock, with the remainder used for debt reduction. FIS estimates if it had the same structure this year as it will have next year, EPS would have been $4.40 to $4.45 a share this year.

I believe the new FIS can earn $4.80 a share next year, with further value enhancement if GTCR, the new majority owner of WorldPay, purchases the entire company. I am lowering my target, given the negative impact of high interest expense, but FIS has a lot of upside if results continue to stabilize.