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Is a Beat in Store for Total System (TSS) in Q2 Earnings?
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Total System Services, Inc. second-quarter earnings scheduled for Jul 24, 2018, should reflect revenue and earnings growth.
Total System’s Issuer Solutions segment should see top-line growth from an increase in Total Accounts on File (AoF), led by new business and internal growth. The Zacks Consensus Estimate for total AoF is 826 million, reflecting an increase of 6.7% year over year. Focus on new product initiatives, technology modernization and integration activities will further aid revenues in the segment.
The company’s NetSpend segment should deliver revenue growth from an increase in gross dollar volume and higher debit active cards. Contract extensions for several significant partnership agreements signed recently should drive the top line. The Zacks Consensus Estimate for total revenues from the segment is $189 million, up 3.3% year over year.
At the start of the year, the company completed its acquisition of Cayan Holdings LLC which became part of the Merchant Solutions segment. This deal will allow Total System to serve about 730,000 merchant sites with an annual processing volume of more than $138 billion, and will be accretive to the segment’s second-quarter earnings. This segment should report revenue growth from the acquisition of TransFirst (made in April 2016). The Zacks Consensus Estimate for revenues from this segment stands at $346 million, which translates into year-over-year growth of 24%.
The company should incur higher interest cost in the second quarter on account of debt taken to close the Cayan acquisition.
Investments made to enhance the company’s infrastructure, longer-term product offerings and technological capabilities, should shoot up expenses and weigh on margins to some extent.
Nevertheless, a decline in tax rate to 21% to 23% range, down from the 32% to 33%, as a result of the Tax Cuts and Jobs Act will aid the company’s margins.
Earnings Surprise History
The company boasts an attractive earnings surprise history. It beat estimates in each of the last four reported quarters, with an average positive surprise of 8.5%. This is depicted in the chart below:
Total System Services, Inc. Price, Consensus and EPS Surprise
Our proven model does not conclusively show that Total System is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1, 2 or 3 for this to happen. But that is not the case here as you will see below.
Earnings ESP: Total System has an Earning ESP of +0.85%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Total System carries a Zacks Rank #4 (Sell). We caution against Sell-rated stocks (#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 also consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
WEX Inc. (WEX - Free Report) has an Earnings ESP of +0.67% and a Zacks Rank #2. The company is expected to report second-quarter earnings results on Jul 26.
Global Payments Inc. (GPN - Free Report) is expected to report second-quarter earnings on Aug 2. This Zacks #3 Ranked stock has an Earnings ESP of +0.15%.
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With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Is a Beat in Store for Total System (TSS) in Q2 Earnings?
Total System Services, Inc. second-quarter earnings scheduled for Jul 24, 2018, should reflect revenue and earnings growth.
Total System’s Issuer Solutions segment should see top-line growth from an increase in Total Accounts on File (AoF), led by new business and internal growth. The Zacks Consensus Estimate for total AoF is 826 million, reflecting an increase of 6.7% year over year. Focus on new product initiatives, technology modernization and integration activities will further aid revenues in the segment.
The company’s NetSpend segment should deliver revenue growth from an increase in gross dollar volume and higher debit active cards. Contract extensions for several significant partnership agreements signed recently should drive the top line. The Zacks Consensus Estimate for total revenues from the segment is $189 million, up 3.3% year over year.
At the start of the year, the company completed its acquisition of Cayan Holdings LLC which became part of the Merchant Solutions segment. This deal will allow Total System to serve about 730,000 merchant sites with an annual processing volume of more than $138 billion, and will be accretive to the segment’s second-quarter earnings. This segment should report revenue growth from the acquisition of TransFirst (made in April 2016). The Zacks Consensus Estimate for revenues from this segment stands at $346 million, which translates into year-over-year growth of 24%.
The company should incur higher interest cost in the second quarter on account of debt taken to close the Cayan acquisition.
Investments made to enhance the company’s infrastructure, longer-term product offerings and technological capabilities, should shoot up expenses and weigh on margins to some extent.
Nevertheless, a decline in tax rate to 21% to 23% range, down from the 32% to 33%, as a result of the Tax Cuts and Jobs Act will aid the company’s margins.
Earnings Surprise History
The company boasts an attractive earnings surprise history. It beat estimates in each of the last four reported quarters, with an average positive surprise of 8.5%. This is depicted in the chart below:
Total System Services, Inc. Price, Consensus and EPS Surprise
Total System Services, Inc. Price, Consensus and EPS Surprise | Total System Services, Inc. Quote
Here is what our quantitative model predicts
Our proven model does not conclusively show that Total System is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1, 2 or 3 for this to happen. But that is not the case here as you will see below.
Earnings ESP: Total System has an Earning ESP of +0.85%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Total System carries a Zacks Rank #4 (Sell). We caution against Sell-rated stocks (#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 also consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Mastercard Incorporated (MA - Free Report) is expected to report second-quarter earnings on Jul 26. This Zacks #3 Ranked stock has an Earnings ESP of +0.58%. You can see the complete list of today’s Zacks #1 Rank stocks here.
WEX Inc. (WEX - Free Report) has an Earnings ESP of +0.67% and a Zacks Rank #2. The company is expected to report second-quarter earnings results on Jul 26.
Global Payments Inc. (GPN - Free Report) is expected to report second-quarter earnings on Aug 2. This Zacks #3 Ranked stock has an Earnings ESP of +0.15%.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>