Global Payments Tops & Asserts

Global Payments Inc. (GPN - Snapshot Report) recently reported fiscal first-quarter earnings of $57.8 million, compared to $57.5 million in the year-ago quarter. Earnings per share came in at 71 cents, beating the Zacks Consensus Estimate by 9.2%, or 6 cents.

Global Payments offers electronic transaction processing services for consumers, merchants, Independent Sales Organizations (ISOs), financial institutions, government agencies and multi-national corporations located across the U.S., Canada, Latin America, Europe and the Asia-Pacific region. The company also offers processing solutions for credit and debit cards, business-to-business purchasing cards, electronic check conversion and check guarantee, verification and recovery including electronic check services and terminal management.

The Atlanta, GA-based company’s revenues recorded a growth of 8.8% year over year to $441.3 million, while on a constant currency basis revenue grew 14% to $462 million. The growth was primarily driven by the flagship Merchant Services segment, which expanded 11.1% year over year to $409.9 million, partially offset by a 14.7% reduction in Money Transfer segment to $31.4 million.

The company’s North American merchant services revenue increased 6.1% year over year to nearly $304 million, mainly due to the company’s ISO channel, which led to a 20% growth in transaction volumes in the U.S. International merchant services business recorded a growth of 28.7% year over year to $105.9 million driven by the acquisition of HSBC Merchant Services in the U.K. coupled with a robust 23% growth posted by the Asia-Pacific business. During July this year Global Payments acquired HSBC Banks Plc.’s remaining 49% stake in HSBC Merchant Services for $307.7 million in an all-cash deal.

Operating income contracted by a marginal 0.5% year over year to $92.6 million, while operating margin dipped by 200 basis points to 21.0%. The reduction in margin was primarily caused by the ISO channel, which is a lower-margin business, as the company pays commission to ISOs.

Long-term debt at the end of the quarter was $374.4 million, compared to $167.6 million in the previous quarter. The higher debt was the result of a term loan raised by Global Payments in order to finance the acquisition of the above-mentioned HSBC unit.

Meanwhile, Global Payments reiterated its full fiscal 2010 revenue guidance between $1.69 billion and $1.74 billion and earnings per share between $2.43 and $2.54. The guidance is in line with the Zacks Consensus Estimate of $2.51 per share, which has edged up a penny over the past week as 5 of 22 covering analysts raised projections. Moreover, the most accurate estimate is even bullish at $2.54 per share.