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Total System's (TSS) Q2 Earnings Beat Estimates, View Up

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Total System Services, Inc.’s second-quarter 2018 earnings per share of $1.11 surpassed the Zacks Consensus Estimate by 2.7% and surged 30.5% year over year. Exceptional performances by all three segments have contributed to this favorable result.

Total System Services, Inc. Price and EPS Surprise

Net revenues were $956.5 million, up 13.3% year over year. The top line also beat the Zacks Consensus Estimate by 2.5%.

The company reported adjusted EBITDA of $345 million, up 12.1% from the year-ago quarter.

Issuer Solutions

In the second quarter, net revenues for this segment increased 7.2% year over year to $421 million driven by 13.3% increase in total transaction year over year.

Operating income of $151 million was up 2.9% year over year. Operating margin of 36% contracted 150 basis points (bps) from the year-ago period.

Merchant Solutions

Net revenues rose 24.3% to $346.4 million. It was mainly backed by Cayan's strong performance and the benefit of the low double-digit organic net revenue growth of pre-Cayan business. Dollar sales volume for the segment grew 29.7% year over year to $40.3 billion.

Operating income increased 22.4% to $124.8 million while operating margin declined 60 basis points to 36% from the prior-year quarter.

Consumer Solutions

Net revenues for this segment amounted to $200 million, up 9.4%, driven by 9.6% growth in GDV and solid contribution across all four distribution channels.

Operating income rose 9.1% to $50.2 million while operating margin contracted 10 basis points to 25.1%.

Financial Position

Total assets jumped 18% from Mar 31, 2018 to $7.5 billion as of Jun 30, 2018.

Total shareholders’ equity climbed to $2.5 billion on Jun 30, 2018 from $2.2 billion at the end of March 2018.

Free cash flow for the first six months of 2018 totaled $382.8 million, up 14.1% from the first half of 2017.

2018 Guidance

Driven by strong second-quarter results and favorable expectations for the remaining year, the company has raised its 2018 view. The company expects total revenues on a GAAP basis in the range of $3.9-$4 billion, down 20-18%. On a non-GAAP basis, net revenues are anticipated in the range of $3.7-$3.8 billion, reflecting year-over-year growth of 10-13%.

GAAP EPS will likely be in the $3.02-$3.12 band, down 4-1% from the prior-year quarter. Adjusted EPS is expected between $4.3 and $4.4, reflecting an increase of about 28-31%.

Zacks Rank

Total System Services carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases

Alliance Data’s second-quarter bottom line beat estimates on the back Card Services and LoyaltyOne segment results.

Green Dot Corporation (GDOT - Free Report) is set to release second-quarter 2018 earnings on Aug 8 and the consensus mark for the same stands at 63 cents per share, representing improvement from a loss of 14.5% from the year-ago period. The stock carries a Zacks Rank #2 (Buy).

WEX Inc. (WEX - Free Report) is slated to release second-quarter 2018 earnings on Aug 2 and the Zacks Consensus Estimate for the same is pegged at $2.03, translating into a year-over-year rise of 61%. The stock has a Zacks Rank of 2.

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