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Will Macroeconomic Risks Limit Total System's (TSS) Growth?
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On Aug 30, we issued an updated research report on Total System Services Inc. .
Total System is one of the world's largest companies in terms of outsourced payment services with presence in almost 80 countries across the globe. The company has a strong inorganic growth story and continues to form strategic alliances and partnerships to further expand its base. While the acquisition of Netspend significantly boosted the company’s market share as well as bottom line, its latest deal with Swisscard is worth mentioning.
The company’s Merchant Service segment has been performing up to the mark consistently. The acquisition of TransFirst in Apr 2016 not only improved the insurer’s second-quarter net revenue but also bolstered its sales and distribution network.
Total System’s effective capital management is reflected by the 37% increase in free cash flow during the first half of 2016. The company’s capital deployment through share buyback and dividend payments is also impressive.
However, the continuous increase in long-term debt raises concerns. Despite being substantially value accretive, the acquisition of TransFirst for $2.35 billion resulted in the high level of leverage. As a result, the company is now undertaking strategic initiatives to lower its debt burden and protect its share price from declining.
The company’s earnings are also prone to currency volatility. Potential currency impacts in the back half of the year are expected to reduce net revenue yearly growth rate by approximately 100 basis points with a potential $0.02 of negative EPS (Earnings Per Share) impact.
In addition, the intensely competitive global payments industry is a major threat. Volatile macroeconomic factors, costly compliance burdens, regulatory challenges are other headwinds
Zacks Rank & Stocks to Consider
Total System presently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the finance sector include Wex Inc. (WEX - Free Report) , Agro Group International Holdings Ltd. and Allied World Assurance Company Holdings AG (AWH - Free Report) . All of these stocks sport a Zacks Rank #1 (Strong Buy).
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Will Macroeconomic Risks Limit Total System's (TSS) Growth?
On Aug 30, we issued an updated research report on Total System Services Inc. .
Total System is one of the world's largest companies in terms of outsourced payment services with presence in almost 80 countries across the globe. The company has a strong inorganic growth story and continues to form strategic alliances and partnerships to further expand its base. While the acquisition of Netspend significantly boosted the company’s market share as well as bottom line, its latest deal with Swisscard is worth mentioning.
The company’s Merchant Service segment has been performing up to the mark consistently. The acquisition of TransFirst in Apr 2016 not only improved the insurer’s second-quarter net revenue but also bolstered its sales and distribution network.
Total System’s effective capital management is reflected by the 37% increase in free cash flow during the first half of 2016. The company’s capital deployment through share buyback and dividend payments is also impressive.
However, the continuous increase in long-term debt raises concerns. Despite being substantially value accretive, the acquisition of TransFirst for $2.35 billion resulted in the high level of leverage. As a result, the company is now undertaking strategic initiatives to lower its debt burden and protect its share price from declining.
The company’s earnings are also prone to currency volatility. Potential currency impacts in the back half of the year are expected to reduce net revenue yearly growth rate by approximately 100 basis points with a potential $0.02 of negative EPS (Earnings Per Share) impact.
In addition, the intensely competitive global payments industry is a major threat. Volatile macroeconomic factors, costly compliance burdens, regulatory challenges are other headwinds
Zacks Rank & Stocks to Consider
Total System presently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the finance sector include Wex Inc. (WEX - Free Report) , Agro Group International Holdings Ltd. and Allied World Assurance Company Holdings AG (AWH - Free Report) . All of these stocks sport a Zacks Rank #1 (Strong Buy).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>