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Global Payments' (GPN) Q4 Earnings Lag, Revenues Grow Y/Y

Global Payments Inc. GPN reported fourth-quarter 2022 adjusted earnings per share (EPS) of $2.42, which missed the Zacks Consensus Estimate by 1.2% and our estimate of $2.64. Yet, the bottom line advanced 14% year over year.

Adjusted net revenues amounted to $2,022.3 million, which improved 2% year over year. The top line fell shy of the consensus mark by a whisker and our consensus mark of $2,362.3 million.

The quarterly results suffered an elevated selling, general and administrative (SG&A) expense level coupled with a considerable increase in interest and other expenses. Nevertheless, the downside was partly offset by strong performances put forward by GPN’s Merchant and Issuer businesses.

Global Payments Inc. Price, Consensus and EPS Surprise

 

Global Payments Inc. Price, Consensus and EPS Surprise
Global Payments Inc. Price, Consensus and EPS Surprise

Global Payments Inc. price-consensus-eps-surprise-chart | Global Payments Inc. Quote

 

Operating Performance

The adjusted operating income rose 7.8% year over year to $898.2 million in the fourth quarter, lower than our estimate of $1,028.4 million.

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The adjusted operating margin improved 240 basis points (bps) year over to 44.4%, beating our estimate of 43.5%.

Total operating expenses of $1,845.4 million dipped 1.5% year over year and came lower than our estimate of $1,952.7 million. The improvement in the metric came on the back of lower cost of services, partly offset by an increase in selling, general and administrative expenses. Interest and other expenses plunged 38.8% year over year to $121.8 million.

Segmental Performances

Merchant Solutions: The segment recorded adjusted revenues of $1,409.6 million, which grew 5.2% year over year in the quarter under review. The improvement can be attributed to global constant currency volume growth of 9%, excluding the impact of dispositions. The reported figure came lower than the Zacks Consensus Estimate of $1,456 million.

The segment’s adjusted operating income rose 5.5% year over year to $681.7 million, lower than the consensus mark of $754 million.

Issuer Solutions: Adjusted revenues of the segment came in at $501.3 million, up 1.3% year over year. The figure missed the Zacks Consensus Estimate of $507 million and our estimate of $535.3 million.

The segment reported an adjusted operating income of $241.9 million, which improved 14.5% year over year in the fourth quarter. The reported figure surpassed the consensus mark of $236 million and our estimate of $239.3 million. Commercial card transaction growth shaped the segment’s quarterly performance.

Consumer Solutions: The segment reported adjusted revenues of $136.5 million, which dropped 22% year over year in the fourth quarter. Adjusted operating income of $58.4 million surged 68.8% year over year and matched our estimate.

Financial Position (as of Dec 31, 2022)

Global Payments exited the fourth quarter with cash and cash equivalents of $1,997.6 million, which inched up 0.9% from the 2021-end level.

Total assets of $44,809 million dipped 1% from the figure at the 2021 end.

Long-term debt amounted to $12,289.2 million, which increased 7.7% from the figure as of Dec 31, 2021. The current portion of long-term debt was $1,169.3 million at the fourth-quarter-end.

Total equity of $22,540.2 million dropped 12.9% from the 2021-end level.

During 2022, net cash provided by operating activities of $2,244 million decreased 19.3% from the 2021-end figure.

Capital Deployment

In the fourth quarter, Global Payments bought back shares worth $781.6 million. A share repurchase capacity of up to $1.5 billion has been reapproved by management.

GPN sanctioned a quarterly dividend of 25 cents per share, which will be paid out on Mar 31, 2023, to its shareholders of record as of Mar 17, 2023.

Business Update

Global Payments continues to expect the buyout of the leading payment technology and services provider EVO Payments EVOP and the sell-off of Netspend’s consumer assets to be closed within the first quarter of 2023.

Additionally, GPN inked a definitive deal to divest its Gaming Solutions business to Parthenon Capital Partners for $415 million, which is also likely to be completed by the end of first-quarter 2023.

1Q23 View

Adjusted net revenues are forecasted to witness year-over-year growth in the range of 2-3%, while adjusted EPS is estimated to record 12-13% growth. The adjusted operating margin is predicted to improve by around 200 bps in the first quarter of 2023.

2023 Guidance

Management anticipates adjusted net revenues to lie between $8,575 million and $8,675 million, which indicates an improvement of 6-7% from the 2022 reported figure of $8,091.7 million.

Adjusted net revenues in the Merchant Solutions segment are estimated to witness year-over-year growth of 15-16%, while the same for the Issuer Solutions segment is expected to register 4.5-5.5% growth.

Adjusted EPS is forecasted within $10.25-$10.37, suggesting 10-11% growth from the 2022 figure of $9.32. GPN expects to convert almost 100% of adjusted net income into adjusted free cash flow.

Adjusted operating margin is likely to increase up to 120 bps in 2023. The metric came in at 43.7% in 2022.

Zacks Rank

Global Payments currently has a Zacks Rank #4 (Sell).

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

Other Business Services Sector Releases

Of the Business Services sector players that have already released fourth-quarter results so far, the bottom-line results of S&P Global Inc. SPGI and FLEETCOR Technologies, Inc. FLT beat the respective Zacks Consensus Estimate.

S&P Global reported fourth-quarter 2022 adjusted earnings per share of $2.54, which beat the Zacks Consensus Estimate by 2.8% but decreased 19.4% year over year. Revenues of $2.94 billion beat the Zacks Consensus Estimate by 2.5% and improved 40.6% year over year. The Market Intelligence segment of SPGI recorded adjusted revenues of $10.4 billion, up 83% year over year.

FLEETCOR Technologies’ fourth-quarter 2022 adjusted earnings of $4.04 per share outpaced the Zacks Consensus Estimate by 3.3% and increased 8.6% year over year.   FLT’s revenues of $883.6 million beat the Zacks Consensus Estimate by 1.2% and increased 10.1% year over year on a reported basis and 7% on a pro-forma and macro-adjusted basis.  Product-category-wise, fuel revenues of $351.1 million rose 11% year over year on a reported basis and 2% on a pro-forma and macro-adjusted basis.

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EVO Payments, Inc. (EVOP) : Free Stock Analysis Report

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