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Global Payments (GPN) Q2 Earnings: What's in the Cards?

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Global Payments Inc.’s (GPN - Free Report) second-quarter earnings scheduled for Aug 2, 2018, should reflect revenue and earnings growth.

The company has witnessed revenue growth for the past several quarters and the trend is expected to continue in the to-be-reported quarter, led by accretion from the merger with Heartland Payments, other alliances and joint ventures. Moreover, there is ever-increasing demand for electronic payment transactions, which provide the company abundant scope for top-line growth.

Region-wise, the United States should show higher revenues led by its direct distribution business, partly offset by a decline in the wholesale business. Europe should benefit from increased business in Spain, reflecting ongoing strength in share gains. Its ecommerce and omnichannel solutions business should grow as it continues to win in the Europe market with differentiated offerings.

Asia Pacific business should show strong revenues from Philippines, Singapore, Hong Kong, China and Australia.

A reduction in tax rate in the range of 22% to 23%, down from approximately 26.5% in 2017, should aid margins.

We expect the company to have used its cash to pay down debt, which will result in the reduction of leverage ratio.

In the first quarter, the company completed a refinancing of its term loan B, which reduced the interest rate spread on the facility by 25 basis points.

The refinancing will generate interest savings of approximately $2.8 million annually, which will help to offset some of the impact of the rising underlying rates in 2018. The second quarter should also gain from savings in interest expense.

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 3.36%. This is depicted in the chart below:

Global Payments Inc. Price and EPS Surprise

Here is what our quantitative model predicts:

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 favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: Global Payments has an Earning ESP of -0.68%. 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 #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 to Consider

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:  

Diebold Nixdorf, Incorporated (DBD - Free Report) is expected to report second-quarter 2018 earnings results on Aug 1. The company has an Earnings ESP of +250% and a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

WEX Inc. (WEX - Free Report) has an Earnings ESP of +0.16% and a Zacks Rank #2. The company is expected to report second-quarter earnings results on Aug 2.

Vantiv, Inc. (WP - Free Report) is expected to report second-quarter 2018 earnings results on Aug 9. The company has an Earnings ESP of +0.49% and a Zacks Rank #3.

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