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Will Top-Line Growth Aid Total System (TSS) Earnings in Q4?

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Total System Services, Inc.’s fourth-quarter results, scheduled for Jan 23, are expected to witness revenue gains from its Merchant segment on the back of its robust distribution network, product portfolio, channel diversification and fast-growing integrated channel. The acquisition of TransFirst (in April 2016) will also be accretive to the segment’s earnings in the form of higher processing volumes, product fees and processing fees. The Zacks Consensus Estimate for revenues from this segment stands at $608 million, which translates into year-over-year growth of 67.5%.

Total Accounts on File (AoF), a major revenue driver of the company’s Issuer Solutions segment, increased for the first nine months of 2017 and the fourth quarter is not expected to be any different. The Zacks Consensus Estimate for total AoF is 809 million, reflecting an increase of 7.6% year over year. Focus on new product initiatives, technology modernization and integration activities will further aid revenues in the segment.

We also expect to see higher revenues from the company’s Netspend segment (acquired in 2013), which has been seeing revenue growth for many quarters in a row. The Zacks Consensus Estimate for revenues of this segment is $174 million, which reflects a year-over-year increase of 8.1%.

We also expect the company to generate strong cash flow like it has been doing for the past many quarters.  Its bottom line will get an added boost from shares bought back during the quarter.

Nevertheless, investments made to enhance the company’s infrastructure, longer-term product offerings and technological capabilities, should shoot up expenses and weigh on margins to some extent.

Earnings Surprise History

The company boasts an attractive earnings surprise history, having surpassed estimates in each of the trailing four reported quarters, with an average positive surprise of 5.7%.

Here is What Our Quantitative Model Predicts:

Our proven model shows that Total System does not have the right combination of the two key ingredients to beat earnings estimates.

Zacks ESP:  Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because the Most Accurate estimate of 78 cents is same as the Zacks Consensus Estimate.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Total System carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank of #1, 2 or 3 have a significantly higher chance of beating on earnings.

Other Stocks Worth a Look

Here are some other companies from the same space that possess the right combination of elements to beat estimates this quarter:  

Discover Financial Services (DFS - Free Report) will report fourth-quarter earnings on Jan 24. It sports a Zacks Rank #1 (Strong Buy) and has an Earnings ESP of +0.04%. You can see the complete list of today’s Zacks #1 Rank stocks here.

CIT Group, Inc is expected to report fourth-quarter earnings on Jan 30. It carries a Zacks Rank #2 and has  an Earnings ESP of +0.04%.

Houlihan Lokey, Inc. (HLI - Free Report) is expected to report fourth-quarter earnings on Jan 29. It carries a Zacks Rank #1 and has an Earnings ESP of +12.73%.

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