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Why You Should Add Global Payments (GPN) to Your Portfolio

Global Payments Inc. GPN benefits from solid segmental contribution, improving margins, higher transaction volumes, acquisitions and collaborations coupled with a strong financial position.

Zacks Rank & Price Rally

Global Payments currently carries a Zacks Rank #2 (Buy).

The stock has gained 4.8% in the past year compared with the industry’s 15.8% growth. Strong revenue growth outlook, improving margins and expense synergies are expected to enhance the stock’s position in the future.

Optimistic Growth Projections

The Zacks Consensus Estimate for GPN’s 2024 earnings is pegged at $11.63 per share, suggesting 11.6% growth from the 2023 figure. The consensus mark for revenues is $9.2 billion, which indicates a rise of 6.4% from the 2023 figure.

Earnings Surprise History

The bottom line of Global Payments outpaced estimates in each of the trailing four quarters, the average surprise being 1.1%.

Global Payments Inc. Price and EPS Surprise

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

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

Business Tailwinds

Strong contributions from the Merchant Solutions and Issuer Solutions segments continue to drive revenue growth of Global Payments. Revenues in both segments improved 15.6% and 5.2%, respectively, on a year-over-year basis in the first quarter of 2024. Adjusted net revenues are anticipated to be in the range of $9.17-$9.30 billion, indicating an improvement of 6-7% from the 2023 figure of $8.7 billion. Merchant Solutions’ performance benefits on the back of higher transaction volumes, while the Issuer Solutions unit earns payment processing services revenues derived from GPN’s long-term processing contracts with financial institutions and other financial services providers.

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Adjusted revenue growth in the Merchant Solutions and Issuer Solutions segment is expected to record growth of more than 9% and 5-6%, respectively, in 2024. Moreover, the company expects the annual adjusted operating margin to increase to 30 bps and 50 bps, respectively, in Merchant Solutions and Issuer Solutions.

Global Payments resorts to acquisitions, partnerships and joint ventures for enhancing capabilities, boosting business scale, expanding share across existing markets as well as stepping into new markets. The acquisition of the global payment technology integrations and acquiring solutions provider, EVO Payments, led to the expansion of products like GP Com, commerce enablement, fraud and tokenization solutions and e-commerce in Europe.

GPN recently formed a joint venture with Commerzbank to benefit the nationwide small-sized and medium-sized business clients of the bank with enhanced digital payment services. The company is on track to launch joint venture Commerz Global Pay in May 2024. Buyouts remain one of management’s priorities to allocate capital.

The payments technology company continues to make several technology investments related to new product development and innovation, as well as the transition of specific underlying technology platforms to cloud environments. These initiatives are meant to upgrade the performance of the operating platforms, diversify its technology and cloud-based solutions suite, and drive cost efficiencies.

Meanwhile, Global Payments will continue to benefit from the expense synergies stemming from the EVO acquisition. It expects to achieve $135 million in annual run rate expense synergies within the next two years. It expects to achieve 50% of this target in 2024. To intensify focus on serving its core corporate customers, GPN resorts to divesting businesses and selling the consumer part of Netspend business was one such act.

Global Payments holds an impressive financial stand, substantiated by a strong cash balance and robust cash-generating abilities. It generated adjusted free cash flows of $986 million in the first quarter of 2024, which improved 18.2% from the prior-year figure.

The financial strength imparts GPN the power to pursue business investments and come up with enhanced technologies that position it ahead of industry peers.  Management also returns capital to shareholders via share repurchases and regular dividend payments.

Other Stocks to Consider

Some other top-ranked stocks in the Business Services space are Duolingo, Inc. DUOL, Clean Harbors, Inc. CLH and FTI Consulting, Inc. FCN. Duolingo sports a Zacks Rank #1 (Strong Buy), and Clean Harbors and FTI Consulting carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The bottom line of Duolingo outpaced estimates in each of the last four quarters, the average surprise being 115.22%. The Zacks Consensus Estimate for DUOL’s 2024 earnings is pegged at $1.74 per share, which indicates a nearly five-fold increase from the prior-year reported figure. The consensus mark for revenues suggests an improvement of 37.8% from the prior-year figure. The consensus mark for DUOL’s 2024 earnings has moved 13% north in the past seven days.

Clean Harbors’ earnings outpaced estimates in three of the trailing four quarters and missed the mark once, the average surprise being 0.65%. The Zacks Consensus Estimate for CLH’s 2024 earnings suggests an improvement of 6.7% from the prior-year reported figure. The consensus estimate for revenues suggests growth of 8.3% from the prior-year reported figure. The consensus mark for CLH’s 2024 earnings has moved 1.1% north in the past 30 days.

The bottom line of FTI Consulting outpaced estimates in each of the last four quarters, the average surprise being 27.82%. The Zacks Consensus Estimate for FCN’s 2024 earnings suggests an improvement of 6.6% from the prior-year reported figure. The consensus estimate for revenues suggests growth of 6.5% from the prior-year reported figure. The consensus mark for FCN’s 2024 earnings has moved 0.9% north in the past 30 days.

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