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Why Is Global Payments (GPN) Down 2.8% Since Last Earnings Report?

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It has been about a month since the last earnings report for Global Payments (GPN - Free Report) . Shares have lost about 2.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Global Payments due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Global Payments Q3 Earnings & Revenues Top, View Up
 
Global Payments Inc. came up with third-quarter 2018 adjusted earnings of $1.44 per share, beating the Zacks Consensus Estimate of $1.40 by 2.9% and improving 25% year over year.
The quarter benefited from a strong momentum in integrated and vertical markets plus ecommerce and omnichannel businesses, which delivered double digit growth in the third quarter.
 
Behind the Headlines
 
Adjusted net revenues plus network fees were $1,025 million, up 12% year over year. The top line marginally surpassed the Zacks Consensus Estimate by 0.1%.
 
Total operating expense of $634.5 million decreased 26.7% year over year, led by a lower cost of services as well as a decline in selling, general and administrative expenses.
 
Adjusted operating margin expanded 120 basis points to 33%.
 
Growth Across Segments
 
North America: Adjusted net revenues plus network fees of $755.8 million increased 13.1% year over year. Operating income of $259.1 million was up 19.5% year over year.
 
Europe: Adjusted net revenues plus network fees of $193.6 million grew 9.5% year over year. Operating income of $92.2 million increased 10.9% year over year.
 
Asia-Pacific: Adjusted net revenues plus network fees of $75.4 million rose 9.6% year over year. Operating income of $25.4 million grew 14.6% year over year.
 
Strong Financial and Balance Sheet Position
 
Total cash and cash equivalents as of Sep 30, 2018 were $990.6 million, down by 25.8% from $1.3 billion as of Dec 31, 2017.
 
Long-term debt as of Sep 30, 2018 was $4.7 billion, up 3.2% from $4.6 billion at 2017 end.
 
Net cash provided by operating activities for the first nine months was $661 million, up 83.6% year over year.
 
The board of directors approved a quarterly dividend of 1 cent per share, payable Dec 28, 2018 to shareholders of record as of Dec 14, 2018.
 
2018 Guidance Raised
 
Given a solid third-quarter performance, the company lifted its 2018 outlook.
Adjusted earnings are now expected in the range of $5.12-$5.22, up from the earlier guidance of $5.05-$5.20 per share. The bottom line translates into 28-30% growth over the level in 2017.
 
Adjusted net revenues are still estimated between $3.96 billion and $3.98 billion, up from the previous prediction of $3.9-$3.975 billion. The bottom line reflects a 15% rise over the level in 2017.
 
Adjusted operating margin for 2018 is still projected to grow 120 basis points.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, Global Payments has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Global Payments has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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