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Global Payments (GPN) Beats on Q2 Earnings, Ups EPS Guidance

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Global Payments Inc. (GPN - Free Report) came up with second-quarter 2018 adjusted earnings of $1.29 per share, beating the Zacks Consensus Estimate of $1.22 by 5.7% and surging nearly 37% year over year.

The above upside was mainly driven by an ongoing business momentum as well as the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers.

Adjusted net revenues plus network fees were $982.5 million, up 18% year over year. The top line also surpassed the Zacks Consensus Estimate by 1.5%.

Total operating expense of $642.4 million decreased 22.7% year over year, led by a whopping 78% slump in cost of service.

Adjusted operating margin expanded 160 basis points to 31.4%.

Growth Across Segments

North America: Adjusted net revenues plus network fees of $718.5 million increased 18.3% year over year. Operating income of $232.8 million was up 25.8% year over year.

Europe: Adjusted net revenues plus network fees of $190 million grew 19.5% year over year. Operating income of $90 million increased 24.7% year over year.

Asia-Pacific: Adjusted net revenues plus network fees of $73.7 million rose 13.8% year over year. Operating income of $23 million grew 18.7% year over year.

Strong Financial and Balance Sheet Position

Total cash and cash equivalents as of Jun 30, 2018 were $1 billion, down by 17.7% from $1.3 billion as of Dec 31, 2017. This downtrend is mainly due to lower settlement processing assets, current assets and goodwill.

Long-term debt as of Jun 30, 2018 was $4.2 billion, down from $4.5 billion at 2017 end.

The company also approved a quarterly dividend of 1 cent per share, payable Sep 28, 2018 to shareholders of record as of Sep 14, 2018.

2018 Guidance

Given a solid second-quarter performance, the company raised its 2018 outlook.

Adjusted earnings are now expected in the range of $5.05-$5.20, tweaked from $5-$5.20 per share, guided earlier. The bottom line translates into 26-30% growth over the level in 2017.

However, the company retains its view for the following items:

Adjusted net revenues are still estimated between $3.9 billion and $3.975 billion. The bottom line reflects a 13-15% rise over the level in 2017.

Adjusted operating margin for 2018 is projected to grow 120 basis points.

The outlook for 2018 does not include any impact from the acquisition of AdvancedMD.

Zacks Rank and Other Performances

Global Payments carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other Financial Transaction Services providers, Visa Inc. (V - Free Report) , Total System Services, Inc. (TSS - Free Report) and Alliance Data Systems Corp. (ADS - Free Report) beat the respective Zacks Consensus Estimate.

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