Heartland Payment Systems

Company Description

Heartland Payment provides bankcard payment processing services in the United States and Canada. It facilitates the exchange of information and funds between merchants and cardholder's financial institutions and offers end-to-end electronic payment processing services, including merchant set-up and training, transaction authorization and electronic draft capture, clearing and settlement, merchant accounting, merchant assistance and support, and risk management to merchants. The company markets its bankcard payment processing services directly to small and mid-sized merchants, and national and mid-tier merchants. Heartland Payment was incorporated in 2000 and is headquartered in Princeton, New Jersey.

Heartland Payment Beats Estimates in Five Straight Quarters

Heartland Payment topped the Zacks Consensus Estimate in each of the last five quarters. During the string of positive earnings surprises, the company topped estimates by an average of $0.05 per share which translated into a 24.5% surprise. Wall Street has taken notice, and as a result of the strong string of earnings the stock has moved higher by an average of more than 10% following the earnings reports.

The largest impact on shares came following the March 2011 quarter . Heartland Payment reported earnings of $0.20 per share, $0.06 ahead of the Zacks Consensus Estimate. That quarter saw revenues of $468 million, about $19 million ahead of expectations. The beats on the top and bottom line helped lift the stock higher by 15% in the session following the report.

Heartland Payment Most Recent Report

On May 1, the company reported earnings of $0.34, $0.10 better than the Zacks Consensus Estimate of $0.24. The 41% positive earnings surprise was also backed up by a beat on the top line as well. The stock moved higher by 7.25% in the trading session following the fifth straight positive earnings surprise.

Heartland Payment Sees Estimates Moving Higher

Estimates for Heartland Payment have been rising of late. The Zacks Consensus Estimate for 2012 for Heartland Payment Automotive stood at $1.31 as of January 2012. The consensus has since moved higher to $1.46. Over the same time period estimates for 2013 have moved from $1.53 to $1.74. The implied earnings growth rate of more than 19% is just what aggressive growth investors are seeking.

Valuation

Heartland Payment trades at a premium to the industry average on nearly all metrics that aggressive growth investors follow. The trailing twelve months PE of 22x is well above the 15x industry average. The forward PE carries a similar premium, with a 19x multiple compared to a 12x industry average multiple. The price to book of 4.7x is much higher than the 2.6x industry average. The only metric that has Heartland Payment trading at a discount to the industry average is a price to sales. Trading at only 0.5x trailing twelve months sales, HPY's multiple is more than 4 times lower than the industry average of 2.35x.

The Chart

A quick look at price and consensus chart shows aggressive investors something that gets their hearts pumping. A steady stream of positive earnings revisions has turned this chart into the dream idea of improving prospect for a stock. The earnings growth is clearly visible between 2011 and 2012, and the gap continues to be strong with the increasing gap between 2012 and 2013. One of the strongest indications of potential out performance is the continued increases for 2012 and 2013, suggesting that the growth the company is seeing is not limited to one year. Stock has yet to catch up to the strong earnings growth which implies that it is undervalued. Heartland Payment is a Zacks #1 Rank (Strong Buy).

Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service

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