Yahoo Finance Global Payments (GPN) Down 1.6% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Global Payments (GPN). Shares have lost about 1.6% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Global Payments' Q1 Earnings Beat, Hikes '23 EPS View
Global Payments reported first-quarter 2023 adjusted earnings per share (EPS) of $2.40, which outpaced the Zacks Consensus Estimate by 4.4% and our estimate of $2.32. The bottom line improved 16% year over year.
Adjusted net revenues of $2,049.5 million rose 5% year over year in the quarter under review. The top line beat the consensus mark by 2.3% and our estimate of $2,003.2 million.
The quarterly results gained on the back of solid contributions from its merchant and core issuer businesses. The merchant business benefited from its expanding presence across worldwide markets. However, an elevated expense level partly offset the upside.
Operating Performance
The adjusted operating income advanced 10% year over year to $882.5 million in the first quarter and came higher than our estimate of $862.5 million.
The adjusted operating margin of 43.1% improved 200 basis points (bps) year over year and matched our estimate.
Total operating expenses escalated 25.6% year over year to $2,235.7 million in the quarter under review. The increase was due to a significant rise in selling, general and administrative expenses. Interest and other expenses of $122.9 million rose 31.8% year over year but came lower than our estimate of $138.9 million.
Segmental Performances
Merchant Solutions: Adjusted revenues of the segment amounted to $1,456.4 million, which grew 8.9% year over year in the first quarter. The improvement came on the back of global constant currency volume growth of 10%, excluding the impact of dispositions. The reported figure surpassed the Zacks Consensus Estimate of $1,420 million and our estimate of $1,429.3 million.
The segment’s adjusted operating income of $688.3 million improved 8.9% year over year and beat the consensus mark of $670 million as well as our estimate of $673.3 million.
Issuer Solutions: The segment recorded adjusted revenues of $490.2 million, which rose 4.7% year over year in the quarter under review, thanks to core issuer constant currency growth and expanding commercial card transactions. The figure outpaced the Zacks Consensus Estimate of $486 million and our estimate of $477.5 million.
Adjusted operating income came in at $215.2 million, up 6.7% year over year but fell short of the consensus mark of $220 million and our estimate of $215.4 million.
Consumer Solutions: The segment’s adjusted revenues of $129.2 million fell 23.6% year over year in the first quarter. However, adjusted operating income soared 50.4% year over year to $57.3 million.
Financial Position (as of Mar 31, 2023)
Global Payments exited the first quarter with cash and cash equivalents of $2,001.7 million, which inched up 0.2% from the figure at 2022 end.
Total assets of $48,638.6 million grew 8.5% from the 2022-end level.
Long-term debt amounted to $16,534.1 million, which increased 34.5% from the figure as of Dec 31, 2022. The current portion of long-term debt amounted to $1,185.4 million at the end of the first quarter.
Total equity of $22,326.8 million dipped 0.9% from the 2022-end level.
In the reported quarter, GPN generated operating cash flows of $599.5 million, which tumbled 4.8% year over year.
Capital Deployment Update
In the first quarter, Global Payments bought back common shares worth $202.8 million. Management sanctioned a quarterly dividend of 25 cents per share, which will be paid out on Jun 30, 2023, to its shareholders of record as of Jun 15, 2023.
Business Update
Global Payments completed the buyout of the leading payment technology and services provider EVO Payments in late March 2023. It has also closed the divestiture of Netspend’s consumer assets in late April. GPN completed the sale of its Gaming Solutions business at the close of the reported quarter.
2023 Guidance
On the basis of the robust financial results delivered in the first quarter of 2023, management hiked the 2023 guidance for some metrics.
Adjusted net revenues are currently forecast to lie between $8,635 million and $8,735 million, up from the prior guidance of $8,575-$8,675 million. The midpoint of the revised outlook implies an improvement of 7-8% from the 2022 reported figure.
Adjusted net revenue growth in the Merchant Solutions segment is estimated to stay at the higher end of the 15-16% range in 2023. Meanwhile, the Issuer Solutions segment’s adjusted net revenues are projected within the 5-6% band.
Adjusted EPS is anticipated to lie between $10.32 and $10.44 this year, up from the previous guidance of $10.25-$10.37. The midpoint of the updated guidance suggests 11-12% growth from the 2022 figure. GPN expects to convert almost 100% of adjusted net income into adjusted free cash flow.
The adjusted operating margin is continued to be expected to increase up to 120 bps in 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, Global Payments has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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
Estimates have been trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Global Payments has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Global Payments belongs to the Zacks Financial Transaction Services industry. Another stock from the same industry, Fidelity National Information Services (FIS), has gained 1.6% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.
Fidelity National reported revenues of $3.51 billion in the last reported quarter, representing a year-over-year change of +0.5%. EPS of $1.29 for the same period compares with $1.47 a year ago.
For the current quarter, Fidelity National is expected to post earnings of $1.48 per share, indicating a change of -14.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.1% over the last 30 days.
Fidelity National has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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Global Payments Inc. (GPN) : Free Stock Analysis Report
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