Global Payments Inc.’s GPN accretive acquisitions, growing payments volume, strong performing Merchant Solutions business and streamlining of business make it worth retaining in one’s portfolio. Also, its favorable growth estimates are confidence boosters for investors.
Zacks Rank & Price Performance
GPN currently carries a Zacks Rank #3 (Hold). In the past six months, the stock has gained 2.5% compared with the industry’s rise of 9.4%.
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Optimistic Growth Projections
The Zacks Consensus Estimate for GPN’s 2023 earnings is pegged at $10.35, indicating an 11.1% increase from the year-ago reported figure of $9.32. The same for GPN’s 2023 revenues is pegged at $8.6 billion, indicating a 6.7% increase from the year-ago reported figure of $8.1 billion.
Global Payments is a Fortune 500 leading payments technology company providing software and services to financial institutions across 170 countries. GPN has been witnessing growth in revenues over the last few years, banking on improving cross-border, domestic corporate travel and transaction volumes.
Merchant Solutions contributed 69.1% to the total revenues in 2022, and this figure is expected to grow further as transaction fees will boost on the back of volume growth. Adjusted net revenue growth in the Merchant Solutions segment is estimated to stay at the higher end of the 15-16% range in 2023. The segment is set to benefit from strength in technology-enabled businesses and the recovery of Asia-Pacific business.
The company expects to deliver 5-6% net revenue growth in the Issuer Solutions segment in 2023, owing to exceptional first-quarter performance and a solid conversion pipeline. MineralTree and Netspend B2B business will grow at low double digits, benefiting the segment. Global Payments has signed multi-year extensions with M&T Bank and has nine letters of intent, which will fuel growth in the future.
The company does not hesitate to boost its global footprint with ambitious acquisitions. It acquired EVO Payments, Inc. in August 2022, a leading payments and services provider offering a plethora of solutions to merchants in the United States and Europe. This acquisition expands GPN’s geographic presence, supplements its business-to-business and most importantly, supports its technology-based payments strategy.
Global Payments divested the consumer portion of its Netspend business, aiming to focus on its core corporate customers. The company also entered into a definitive agreement to sell its gaming business. This highlights the company’s unwavering focus on building up its core operations. These moves should lead to lower expenses and improve the bottom line in future.
GPN focuses on top-tier strategic partnerships to grow its business. It has partnered with AWS to deploy cloud-based analytics and data platform for financial institutions. The company has also inked a deal with Mondu to serve financial services customers across use cases, like prepaid cards, lending solutions and credit cards. GPN has also collaborated with leading parks and entertainment companies to provide beverage and Xenial food solutions.
The company’s financial flexibility enables it to invest in technology, strategic partnerships and return capital to shareholders. GPN exited the first quarter with cash and cash equivalents of $2,001.7 million, way above the current portion of long-term debt of $1,185.3 million. It bought back shares worth $200 million in the first quarter of 2023.
An increase in the capacity of the company’s share buyback program was made to bring the total authorization amount to $1,295.7 million. Hence, a strong financial position remains an additional tailwind for Global Payments. This should instill confidence in shareholders.
The company has a VGM Score of B.
However, there are a few factors that have been impeding the stock’s growth lately.
Rising operating expenses are also harming the company’s margins. Despite cost management efforts, operating expenses rose 25.6% year over year. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.
Stocks to Consider
Some better-ranked stocks from the Financial Transaction Services space are Paysafe Limited PSFE, Remitly Global, Inc. RELY and Repay Holdings Corporation RPAY. Each of these companies presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Paysafe Limited’s 2024 earnings indicates 106.2% year-over-year growth. The bottom line of PSFE outpaced the Zacks Consensus Estimate inthree of the last four quarters and met once, the average surprise being 84.3%.
The Zacks Consensus Estimate for PSFE’s 2024 earnings has moved 0.8% north in the past seven days.
The Zacks Consensus Estimate for Remitly Global 2023 earnings indicates 7.4% year-over-year growth. The bottom line of RELY outpaced the Zacks Consensus Estimate intwo of the last four quarters while it missed the other two, the average surprise being 8.2%.
The Zacks Consensus Estimate for Repay Holdings’ 2024 earnings indicates 9.6% year-over-year growth. The bottom line of RPAY outpaced the Zacks Consensus Estimate inthree of the last four quarters, while it missed once, the average surprise being 4.6%.
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