Fiserv reported first quarter 2014 results, which we characterize as modestly better than expectations. Adjusted internal revenue grew 5.6% year-over-year, compared with our estimate of 3.8% growth. The payments segment grew 8.5%, while the financial segment grew 2.7%, with both coming in above  estimates.

The adjusted operating margin was 29.6%, an improvement of 120 basis points yearover- year and 90 basis points above our estimate. Adjusted EPS of $0.82 were well ahead of our estimate of $0.73 and consensus of $0.74. The result was probably closer to a couple of pennies better than expected, all else equal, after taking into consideration a lower tax rate, benefit from termination fees, and a lower share count as Fiserv repurchased 6.1 million shares for an average price of about $57.50.

While there are always a number of puts and takes in Fiserv’s quarterly numbers, we were encouraged by trends, including seven more DNA account processing wins and solid underlying trends in high-margin scale businesses such as debit and bill-pay. In debit, transaction growth decelerated to 11%, from 13% in the fourth quarter, but was affected by weather and Easter timing. For bill-pay, transaction growth slowed to 6%, from 9% in the fourth quarter, but excluding Bank of America (BAC $15.24) the growth rate was in the double digits. Forward-looking commentary remains encouraging, particularly about the growing DNA backlog, successful bundling of solutions, and continued cost-saving opportunities.