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Heartland Payment Beats on Earnings, Revs Lag

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Heartland Payment Systems, Inc. delivered operating net income of 62 cents per share in the third quarter of 2013, surpassing the Zacks Consensus Estimate of 56 cents by 11%. Earnings were 26% higher from 49 cents earned in the prior-year quarter.

Including acquisition-related amortization of 4 cents, net income came in at 58 cents per share, up 23% year over year.

Behind the headlines

Heartland Payment generated total revenues of $557 million, up 5% year over year. However, results lagged the Zacks Consensus Estimate of $568 million by about 2%.

Net revenues were $153.2 million, increasing 9.5% year over year. The improvement was largely fuelled by solid growth in card processing, surge in Payroll, solid contribution from Campus Solutions and a substantial improvement in Micropayments.

Total expenses of Heartland Payment were $552.2 million, up 4.9% year over year, attributable to increase in general and administrative expenses.

Operating margin on net revenues contracted 60 basis points (bps) year over year to 22.8% in the reported quarter.

Small and mid-sized enterprise (SME) quarterly transaction processing volume was $19.6 billion, up 3.9% year over year in the reported quarter. The upside was driven by new card margin installed that increased 9% and same store sales improving 1.6%. Volume attrition was 13% in the reported quarter.

Financial Details

Heartland Payment exited the quarter with $67.2 million in cash and cash equivalents, improving from $48.4 million at the 2012 end-level.

Long term borrowings decreased to $35 million at quarter-end from $50 million at 2012-end.

Cash from operations of Heartland Payment declined to $87.4 million in the first nine months of 2013 from $98.8 million in the year-ago period.

Dividend and Share Repurchase Update

Heartland Payment spent $6 million to buy back 0.2 million shares in the third quarter. The company is left with nearly $64.6 million remaining under its existing repurchase authorization.

The board of directors of Heartland Payment approved a quarterly dividend of 7 cents per share. The dividend will be paid on Dec 13, 2013 to shareholders of record as on Nov 22, 2013.

2013 Guidance

Heartland Payment expects to generate net revenues in the range of $600 million and $605 million. Net earnings are expected to be between $2.30 and $2.33 per share. This includes 37 cents per share related to acquisition-related amortization and share-based compensation expense, and about 4 cents of proportionate losses on the consolidation of Leaf.

Performance of other financial transaction service provider

MasterCard Inc. (MA - Free Report) reported third-quarter 2013 operating earnings per share of $7.27. The results significantly outpaced the Zacks Consensus Estimate of $6.95 and the year-ago quarter figure of $6.17 per share.

Visa Inc.’s (V - Free Report) fiscal fourth-quarter 2013 (ended Sep 30, 2013) operating earnings of $1.85 per Class A common share were in line with the Zacks Consensus Estimate. The figure nevertheless, outpaced the prior-year quarter figure of $1.54 per share.

Alliance Data Systems Corporation (ADS - Free Report) reported adjusted earnings of $2.67 per share in the third quarter of 2013. The earnings lagged the Zacks Consensus Estimate by a penny but were ahead of the year-ago figure by 15.6%.

Zacks Rank

Heartland Payment presently carries a Zacks Rank #3 (Hold).

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