Global Payments Inc. (GPN Quick QuoteGPN - Free Report) is set to report third-quarter 2024 results on Oct. 30, 2024, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $3.11 per share on revenues of $2.38 billion. 

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The third-quarter earnings estimate has witnessed downward revisions over the past 60 days. However, the bottom-line projection indicates a year-over-year increase of 13.1%. The Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 6.6%.

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For the current year, the Zacks Consensus Estimate for Global Payments’ revenues is pegged at $9.22 billion, implying a rise of 6.4% year over year. Also, the consensus mark for current year EPS is pegged at $11.61, implying a jump of around 11.4% on a year-over-year basis.

Global Paymentshas a robust history of surpassing earnings estimates, beating the consensus estimate in each of the last four quarters, with the average surprise being 0.9%. This is depicted in the figure below.

Q3 Earnings Whispers for GPN

However, our proven model does not conclusively predict an earnings beat for the company this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat, but that’s not the case here.

GPN has an Earnings ESP of -0.60% and a Zacks Rank #3.

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What’s Shaping GPN’s Q3 Results?

In the third quarter, results from GPN’s Merchant Solutions — its biggest operating segment — are likely to have increased due to growing transaction volumes, new integrated partners, and point of sale. The Zacks Consensus Estimate for adjusted revenues from Merchant Solutions indicates a 7.1% increase from the year-ago period’s reported number of $1.73 billion, whereas our model estimates a 7.2% increase.

Growing U.S. merchant partners are likely to have aided the Merchant Solutions segment, along with an increase in the ISV channel. The consensus mark for adjusted operating income indicates 8% growth from the year-ago level of $847.7 million, while our model estimate suggests a 6.9% increase.

Both the consensus estimate and our model estimate for Issuer Solutions’ adjusted revenues signal a more than 5% increase from the year-ago figure of $519.7 million. Transactions growth and its expanding traditional accounts are likely to have aided the segment in the quarter under review. Both the consensus estimate and our model estimate for adjusted operating income from the unit indicate a rise of nearly 5% in the third quarter from $246.6 million a year ago.

The Zacks Consensus Estimates for revenues from Americas and Europe operations indicate 5.8% and 2.9% year-over-year increases, respectively, in the third quarter. The above-mentioned factors are expected to have positioned GPN for year-over-year growth.

However, profits from the businesses are likely to have been partially offset by increased costs under certain heads in the third quarter. Our model expects adjusted selling, general and administrative expenses to have increased 8% year over year. For the upcoming quarter, we anticipate the adjusted cost of service to be around $494 million.

Continuous investments to upgrade digital capabilities are likely to have increased expenditures. Adjusted total operating expenses are expected to have climbed 5.4% year over year in the third quarter, making an earnings beat uncertain. Also, both the consensus estimate and our model estimate for revenues from Asia Pacific indicate a 2% year-over-year decline.

GPN’s Price Performance & Valuation

Global Payments' stock has declined 22% year to date, underperforming the industry’s growth of 12.6%. Some of its peers, like Fidelity National Information Services, Inc. (FIS Quick QuoteFIS - Free Report) and American Express Company (AXP Quick QuoteAXP - Free Report) , have gained 49.4% and 42.7%, respectively, during this time. Meanwhile, the S&P 500 Index has increased 21.9% during the same period.

GPN’s YTD Price Performance

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Now, let’s look at the value Global Paymentsoffers investors at current levels.

The company’s valuation looks cheaper compared with the industry average, further impacted by the share price decline. Currently, GPN is trading at 7.82X forward 12 months earnings, below its five-year median of 13.54X and the industry’s average of 23.45X, indicating some investors’ lack of confidence in the stock.

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Should You Buy Global Payments Now?

GPN’s Merchant Solutions business is benefiting from its progressive payment facilitation model and rising demand for point-of-sale solutions. A strong conversion pipeline, account growth, and increased transactions are expected to drive growth in the Issuer Solutions segment. The company’s strategy of tuck-in acquisitions and high-impact partnerships aims to support growth and future-proof its technology. With strong cash generation, Global Payments can make targeted investments and deploy capital prudently, making it a solid hold for current investors to capitalize on future growth prospects.

However, despite GPN's promising long-term outlook, it may not be an ideal time for new purchases. Intensifying competition from emerging payment firms could pressure pricing dynamics, potentially impacting GPN’s pricing power and profitability. Also, the company’s return on equity of 12.31% is considerably below the industry average of 46.44%, indicating possible inefficiencies in utilizing shareholders' funds.

It expects 2025 to be a transition year for the company. It has identified potential divestitures, which account for annual adjusted net revenues of $500-$600 million.By the first half of 2027, the company expects that its transformation and streamlining initiatives will generate over $500 million in run-rate operating income benefits. However, one-time costs are expected to reach two-thirds of the benefits. Investors should monitor these developments and upcoming financial results to evaluate potential shifts in GPN's performance and overall outlook.