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Will Global Payment's (GPN) Q3 Earnings Buoy Up on Revenues?

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Global Payments Inc. (GPN - Free Report) is scheduled to report third-quarter 2017 results on Nov 8.

Riding on an increase in revenues, the company had surpassed the Zacks Consensus Estimate by 2.3% in the second quarter.

Results reflected synergies from the Heartland acquisition (completed last year) and strong organic growth in its direct distribution businesses in the U.S.

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

Global Payments Inc. Price and EPS Surprise

Factors to Consider    

Increase in Revenues: Global Payments has sustained revenue growth for long, a trend that continued in the first half of 2017 (up 28%), driven by the accretion from the merger with Heartland Payments. The company’s consistent acquisitions, alliances and joint ventures fuel business growth and add to its top line. Moreover, there is ever-increasing demand for electronic payment transactions, which provide the company with abundant scope for growth. We thus expect to see increased revenues in the third quarter.

Acquisition of ACTIVE Network: In September, the company completed the acquisition of the communities and sports divisions of ACTIVE Network, which provides cloud-based, mission-critical enterprise software solutions to event organizers. This acquisition will be highly complementary to Global Payments’ gaming business and expand its existing suite of innovative products and solutions. For the third quarter of 2017, the company expects ACTIVE Network to contribute revenues in the range of nearly $13 million to $14 million but have no impact on earnings.

Strong Gaming Business: The company’s gaming business has been performing strongly for the past many quarters. It recently renewed and expanded its relationship with Caesars Entertainment. This renewal reflects the strength of its gaming services and we expect the business to continue its strong performance in the to-be-reported quarter.

Superior Performing International Business: The company’s international business led by Europe and Asia-Pacific remains strong. Given its favorable performance in e-commerce and omni-channel solutions business in Europe, we expect the strength to continue.

Increased Interest Cost and Foreign Exchange Volatility: Nevertheless, the bottom line may suffer from an increase in interest cost due to high debt incurred to fund its acquisitions. Also, its international operations will be exposed to foreign exchange volatility.

Earnings Whispers

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

Zacks ESP: Global Payments has an Earning ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Global Payments carries a Zacks Rank #2 (Buy) which increases the predictive power of ESP. However, the company's 0.00% ESP makes surprise prediction difficult.

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

Stocks That Warrant a Look

Here are some companies that you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:  

Green Dot Corp. (GDOT - Free Report) will report third-quarter 2017 earnings results on Nov 7. It has an Earnings ESP of +3.77% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pinnacle Entertainment, Inc. has an Earnings ESP of +4.76% and a Zacks Rank #3. The company is expected to report third-quarter earnings results on Nov 7.

Crocs, Inc. (CROX - Free Report) has an Earnings ESP of +5.88% and a Zacks Rank #3. The company is expected to report third-quarter earnings results on Nov 7.

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