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Why Is Global Payments (GPN) Up 5% Since Its Last Earnings Report?
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A month has gone by since the last earnings report for Global Payments Inc. (GPN - Free Report) . Shares have added about 5% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is GPN due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Global Payments Beats Q4 Earnings
Global Payments Inc. came up with fourth-quarter 2017 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate of $1.01 and improving 23% year over year.
Better-than-expected earnings were primarily due to higher revenues across its markets.
Global Payments posted revenues of $939 million, which missed the Zacks Consensus Estimate of $942 million but grew 23% year over year. Total operating expense of $904.7 million increased 4% year over year due to an increase in cost of service.
Adjusted operating margin improved 580 basis points to 14.2%
Growth Across Segments
North America: Revenues of $687.7 million increased 14.4% year over year. Operating income of $206.2 million was up 17.8% year over year.
Europe: Revenues of $173.9 million grew 17.2% year over year. Operating income of $83.3 million increased 22.1% year over year.
Asia-Pacific: Revenues of $77.4 million increased 10.6% year over year. Operating income of $26.4 million was up 25.7% year over year.
Strong Financial and Balance Sheet Position
Total cash and cash equivalents as of Dec 31, 2017 were $1.34 billion, up from $1.16 billion as of Dec 31, 2016.
Long-term debt as of Dec 31, 2017 was $4.6 billion, 7% higher year over year.
The company also approved a quarterly dividend of 1 cent per share payable Mar 30, 2018. The board also approved an increase in the company’s existing share repurchase program authorization to $600 million.
2018 Guidance
For 2018, the company expects adjusted earnings of $4.95 to $5.15 per share (up 23% to 28% year over year) and adjusted net revenues between $3.88 billion and $3.97 billion (up 12% to 15% year over year). Adjusted operating margin is expected at 31.5%.
Adoption of Accounting Standards Codification Topic 606 (ASC 606)
Effective Jan 1, 2018, the company has adopted ASC 606, pursuant to which revenues will now be reported net of fees paid to payment networks compared with being reported on gross basis earlier. Also, GAAP revenues associated with the company’s gaming cash advance products will now be reported net of associated commissions paid to casinos. However, these changes will be not leave any impact on the bottom line.
As a result of ASC 606, the netting of casino commissions reduced 2017 reported amounts by approximately $68 million and will likely impact 2018 by an estimated $73 million.
Business Update
Global Payments announced a joint venture with HSBC in Mexico.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
At this time, GPN has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was also allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been trending upward for the stock and the magnitude of this revision looks promising. It comes with little surprise GPN has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Global Payments (GPN) Up 5% Since Its Last Earnings Report?
A month has gone by since the last earnings report for Global Payments Inc. (GPN - Free Report) . Shares have added about 5% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is GPN due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Global Payments Beats Q4 Earnings
Global Payments Inc. came up with fourth-quarter 2017 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate of $1.01 and improving 23% year over year.
Better-than-expected earnings were primarily due to higher revenues across its markets.
Global Payments posted revenues of $939 million, which missed the Zacks Consensus Estimate of $942 million but grew 23% year over year.
Total operating expense of $904.7 million increased 4% year over year due to an increase in cost of service.
Adjusted operating margin improved 580 basis points to 14.2%
Growth Across Segments
North America: Revenues of $687.7 million increased 14.4% year over year. Operating income of $206.2 million was up 17.8% year over year.
Europe: Revenues of $173.9 million grew 17.2% year over year. Operating income of $83.3 million increased 22.1% year over year.
Asia-Pacific: Revenues of $77.4 million increased 10.6% year over year. Operating income of $26.4 million was up 25.7% year over year.
Strong Financial and Balance Sheet Position
Total cash and cash equivalents as of Dec 31, 2017 were $1.34 billion, up from $1.16 billion as of Dec 31, 2016.
Long-term debt as of Dec 31, 2017 was $4.6 billion, 7% higher year over year.
The company also approved a quarterly dividend of 1 cent per share payable Mar 30, 2018. The board also approved an increase in the company’s existing share repurchase program authorization to $600 million.
2018 Guidance
For 2018, the company expects adjusted earnings of $4.95 to $5.15 per share (up 23% to 28% year over year) and adjusted net revenues between $3.88 billion and $3.97 billion (up 12% to 15% year over year). Adjusted operating margin is expected at 31.5%.
Adoption of Accounting Standards Codification Topic 606 (ASC 606)
Effective Jan 1, 2018, the company has adopted ASC 606, pursuant to which revenues will now be reported net of fees paid to payment networks compared with being reported on gross basis earlier. Also, GAAP revenues associated with the company’s gaming cash advance products will now be reported net of associated commissions paid to casinos. However, these changes will be not leave any impact on the bottom line.
As a result of ASC 606, the netting of casino commissions reduced 2017 reported amounts by approximately $68 million and will likely impact 2018 by an estimated $73 million.
Business Update
Global Payments announced a joint venture with HSBC in Mexico.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
Global Payments Inc. Price and Consensus
Global Payments Inc. Price and Consensus | Global Payments Inc. Quote
VGM Scores
At this time, GPN has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was also allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been trending upward for the stock and the magnitude of this revision looks promising. It comes with little surprise GPN has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.