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Can Global Payments (GPN) Pull a Surprise in Q1 Earnings?


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Leading provider of payment technology services, Global Payments Inc. (GPN - Snapshot Report) is sceduled to report first-quarter fiscal 2017 results on Oct 5. Last quarter, the company posted a positive earnings surprise of 7.4%. Over the trailing four quarters, the company delivered a positive average surprise of 7.7%, beating estimates on all occasions.

Let's see how things are shaping up for this announcement.

Factors to Consider

Global Payments expects to maintain its growth momentum in fiscal 2017, as it continues to expand direct distribution to deliver innovative products globally. At the same time, it aims to leverage technology and operating environments and prudently deploy capital to spur growth. The company’s strategic partnership with Heartland is expected to augment its revenues.

The company continues to make strategic progress in expanding its OpenEdge integrated solutions business, and development of its omni-channel solutions offerings. Global Payments has been significantly expanding its presence in Canada. It added over 4,000 new e-commerce customers in the U.K. and Ireland, and inked several enterprise e-commerce clients in the U.K. in the fourth quarter of 2016, leveraging its Realex platform.

During the to-be-reported quarter, the company collaborated with Mary Kay Cosmetics Ltd., to provide various payment gateway services and contactless mobile payments acceptance to their Independent Beauty Consultants in Canada. The solution has an in-app inventory catalogue, digital receipts and a portal for providing useful insights into the business of each individual consultant, along with detailed reporting.

However, close association with the mortgage industry could prove challenging for the company. This is due to a sharp decline in the U.S. mortgage originations, driven by slowing housing sales and a sagging sub-prime lending market. Also, regulatory changes might have an adverse impact on the company’s top line.

GLOBAL PAYMENTS Price and EPS Surprise



Earnings Whispers

Our proven model does not conclusively show that Global Payments will beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, currently stands at 0.00%.

Zacks Rank: Global Payments’ Zacks Rank #2 increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings surprise.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are a couple of companies which per our model, have the right combination of elements to post an earnings beat this quarter:

Intel Corporation (INTC - Analyst Report) has an Earnings ESP of +1.39% and Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

BlackRock, Inc. (BLK - Analyst Report) has an Earnings ESP of +0.20% and Zacks Rank #2. 

Advanced Micro Devices, Inc. (AMD - Analyst Report) has an Earnings ESP of +50.00% and Zacks Rank #2.

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