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Why Is Global Payments (GPN) Up 4.3% Since Last Earnings Report?
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A month has gone by since the last earnings report for Global Payments (GPN - Free Report) . Shares have added about 4.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Global Payments due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Global Payments' Beats on Q2 Earnings, Raises '23 EPS View
Global Payments reported second-quarter 2023 adjusted earnings per share (EPS) of $2.62, which outpaced the Zacks Consensus Estimate by 1.6%. The bottom line improved 11% year over year.
Adjusted net revenues of $2,202.8 million rose 7% year over year in the second quarter. The top line beat the consensus mark by 0.7%.
The strong second-quarter results gained from solid contributions from its merchant and core issuer businesses. Both businesses benefited from rising transaction volumes.
Operating Performance
The adjusted operating income advanced 9.4% year over year to $987 million in the second quarter but lagged our estimate by 0.2%.
The adjusted operating margin of 44.8% improved 100 basis points (bps) year over year but lagged our estimate by 300 bps.
Total operating expenses declined 34.2% year over year to $1,849.7 million in the quarter under review. The significant decline was due to the impairment of goodwill incurred in the prior-year quarter. The metric lagged our estimate by 0.4%. Interest and other expenses of $191.4 million rose 93% year over year and surpassed our estimate by 9.9%.
Segmental Performances
Merchant Solutions: Adjusted revenues of the segment amounted to $1,682.1 million, which grew 17.3% year over year in the second quarter. The improvement came from double-digit vertical market growth, mid-teens integrated growth and record new sales. The company’s recent acquisition of EVO business also added to the upside. The reported figure lagged our estimate by 0.6%.
The segment’s adjusted operating income of $815.2 million improved 13.3% year over year but fell short of our consensus mark by 1.5%.
Issuer Solutions: The segment recorded adjusted revenues of $815.2 million, which rose 13.3% year over year in the quarter under review, thanks to core issuer constant currency growth and expanding commercial card transactions. The figure lagged our estimate by 1.5%.
Adjusted operating income came in at $235.9 million, up 11.6% year over year, beating our estimate by 0.3%.
Consumer Solutions: The segment’s adjusted revenues of $33.8 million fell 79.1% year over year in the second quarter. Adjusted operating income declined 57.4% year over year to $15.9 million.
Financial Position (as of Jun 30, 2023)
Global Payments exited the second quarter with cash and cash equivalents of $1,919.6 million, which declined from $1,997.6 million at 2022-end.
Total assets of $48,150.9 million grew from $44,809 million at 2022-end.
Long-term debt amounted to $16,975.4 million, which increased from $12,289.2 million at 2022-end. The current portion of long-term debt amounted to $75.7 million at the end of the second quarter.
Total equity of $22,416 million dipped from $22,540 at 2022-end.
In the first half of 2023, GPN generated operating cash flows of $1,164.5 million, which tumbled 2.8% year over year.
Capital Deployment Update
In the second quarter, Global Payments bought back common shares worth $207.5 million. Management sanctioned a quarterly dividend of 25 cents per share, which will be paid out on Sep 29, 2023, to its shareholders of record as of Sep 15.
2023 Guidance Raised
On the basis of the robust financial results delivered in the second quarter of 2023, management hiked the 2023 guidance for some metrics.
Adjusted net revenues are currently forecasted to be between $8,660 million and $8,735 million, which improved from the prior guidance of $8,635-$8,735 million. The midpoint of the revised outlook implies an improvement of 7-8% from the 2022 reported figure.
Adjusted net revenue growth in the Merchant Solutions segment is reaffirmed to stay at the higher end of the 15-16% range in 2023. Meanwhile, the Issuer Solutions segment’s adjusted net revenues are projected to be in the 5-6% band.
Adjusted EPS is anticipated to lie between $10.35 and $10.44 this year, indicating an improvement from the previous guidance of $10.32-$10.44. The midpoint of the updated guidance suggests 11-12% growth from the 2022 figure. GPN expects to convert almost 100% of adjusted net income into adjusted free cash flow.
The adjusted operating margin is continued to be expected to increase up to 120 bps in 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
At this time, Global Payments has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Global Payments has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Global Payments belongs to the Zacks Financial Transaction Services industry. Another stock from the same industry, Visa (V - Free Report) , has gained 3.7% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Visa reported revenues of $8.12 billion in the last reported quarter, representing a year-over-year change of +11.7%. EPS of $2.16 for the same period compares with $1.98 a year ago.
For the current quarter, Visa is expected to post earnings of $2.23 per share, indicating a change of +15.5% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.4% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Visa. Also, the stock has a VGM Score of C.
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Why Is Global Payments (GPN) Up 4.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Global Payments (GPN - Free Report) . Shares have added about 4.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Global Payments due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Global Payments' Beats on Q2 Earnings, Raises '23 EPS View
Global Payments reported second-quarter 2023 adjusted earnings per share (EPS) of $2.62, which outpaced the Zacks Consensus Estimate by 1.6%. The bottom line improved 11% year over year.
Adjusted net revenues of $2,202.8 million rose 7% year over year in the second quarter. The top line beat the consensus mark by 0.7%.
The strong second-quarter results gained from solid contributions from its merchant and core issuer businesses. Both businesses benefited from rising transaction volumes.
Operating Performance
The adjusted operating income advanced 9.4% year over year to $987 million in the second quarter but lagged our estimate by 0.2%.
The adjusted operating margin of 44.8% improved 100 basis points (bps) year over year but lagged our estimate by 300 bps.
Total operating expenses declined 34.2% year over year to $1,849.7 million in the quarter under review. The significant decline was due to the impairment of goodwill incurred in the prior-year quarter. The metric lagged our estimate by 0.4%. Interest and other expenses of $191.4 million rose 93% year over year and surpassed our estimate by 9.9%.
Segmental Performances
Merchant Solutions: Adjusted revenues of the segment amounted to $1,682.1 million, which grew 17.3% year over year in the second quarter. The improvement came from double-digit vertical market growth, mid-teens integrated growth and record new sales. The company’s recent acquisition of EVO business also added to the upside. The reported figure lagged our estimate by 0.6%.
The segment’s adjusted operating income of $815.2 million improved 13.3% year over year but fell short of our consensus mark by 1.5%.
Issuer Solutions: The segment recorded adjusted revenues of $815.2 million, which rose 13.3% year over year in the quarter under review, thanks to core issuer constant currency growth and expanding commercial card transactions. The figure lagged our estimate by 1.5%.
Adjusted operating income came in at $235.9 million, up 11.6% year over year, beating our estimate by 0.3%.
Consumer Solutions: The segment’s adjusted revenues of $33.8 million fell 79.1% year over year in the second quarter. Adjusted operating income declined 57.4% year over year to $15.9 million.
Financial Position (as of Jun 30, 2023)
Global Payments exited the second quarter with cash and cash equivalents of $1,919.6 million, which declined from $1,997.6 million at 2022-end.
Total assets of $48,150.9 million grew from $44,809 million at 2022-end.
Long-term debt amounted to $16,975.4 million, which increased from $12,289.2 million at 2022-end. The current portion of long-term debt amounted to $75.7 million at the end of the second quarter.
Total equity of $22,416 million dipped from $22,540 at 2022-end.
In the first half of 2023, GPN generated operating cash flows of $1,164.5 million, which tumbled 2.8% year over year.
Capital Deployment Update
In the second quarter, Global Payments bought back common shares worth $207.5 million. Management sanctioned a quarterly dividend of 25 cents per share, which will be paid out on Sep 29, 2023, to its shareholders of record as of Sep 15.
2023 Guidance Raised
On the basis of the robust financial results delivered in the second quarter of 2023, management hiked the 2023 guidance for some metrics.
Adjusted net revenues are currently forecasted to be between $8,660 million and $8,735 million, which improved from the prior guidance of $8,635-$8,735 million. The midpoint of the revised outlook implies an improvement of 7-8% from the 2022 reported figure.
Adjusted net revenue growth in the Merchant Solutions segment is reaffirmed to stay at the higher end of the 15-16% range in 2023. Meanwhile, the Issuer Solutions segment’s adjusted net revenues are projected to be in the 5-6% band.
Adjusted EPS is anticipated to lie between $10.35 and $10.44 this year, indicating an improvement from the previous guidance of $10.32-$10.44. The midpoint of the updated guidance suggests 11-12% growth from the 2022 figure. GPN expects to convert almost 100% of adjusted net income into adjusted free cash flow.
The adjusted operating margin is continued to be expected to increase up to 120 bps in 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
At this time, Global Payments has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Global Payments has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Global Payments belongs to the Zacks Financial Transaction Services industry. Another stock from the same industry, Visa (V - Free Report) , has gained 3.7% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Visa reported revenues of $8.12 billion in the last reported quarter, representing a year-over-year change of +11.7%. EPS of $2.16 for the same period compares with $1.98 a year ago.
For the current quarter, Visa is expected to post earnings of $2.23 per share, indicating a change of +15.5% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.4% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Visa. Also, the stock has a VGM Score of C.