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4 Reasons Why Total System (TSS) is a Solid Pick Now


Total System Services Inc. TSS seems to be an attractive pick right now given its strong fundamentals and solid growth prospects.

In the last 30 days, the Zacks Consensus Estimate for the company’s earnings has increased 1.5% for 2017 and 1.4% for 2018 to $3.33 and $3.62, respectively. This reflects analysts’ optimism about its prospects. The stock currently carries a Zacks Rank #2 (Buy).

Further, shares of Total System have rallied 47.5% this year, outperforming the industry’s gain of 34.7%. This impressive price performance reflects investors’ positive stance following the company’s strong third-quarter results and subsequent guidance raise.

Key aspects that make Total System an attractive investment option are:

Guidance Raise: Following third-quarter results, the company raised its full-year revenue and earnings per share guidance. It now expects total revenues of $4.839 billion to $4.889 billion (versus the old guidance of $4.80 billion to $4.89 billion), reflecting an increase of 16% to 17% over 2016 and net revenues in the range of $3.345 billion to $3.395 billion ($3.31 billion to $3.39 billion old guidance), up 10% to 12% year over year. Adjusted EPS is guided at $3.29 to $3.35 ($3.22 to $3.30), reflecting an increase of 18% to 20% year over year.

Revenue Strength: Total System’s revenues witnessed a compound annual growth rate of 26% in the last four years (2013-2016). The trend continued in the first nine months of 2017 with total revenues increasing nearly 20%. Also, net revenues are expected to grow in the range of 10% to 12% in 2017.

Earnings per Share Growth: Total System witnessed an average EPS growth of 17.8% from 2011-2016. The trend is expected to continue in the near term. The company’s adjusted earnings are projected in the range of 18% to 20% in 2017.

Strong Capital Position: The company has a strong track of cash flows. Free cash flow grew 45% year over year in 2016, mainly driven by the TransFirst acquisition-related tax benefits. The same was up 22% year over year as of Sep 30, 2017. For 2017, the company expects free cash flow in the $610 million to $640 million range (up from the previous range of $600 million and $630 million). The company also remains committed to enhance shareholders’ value via disciplined capital management.

Other Stocks to Consider

A few other stocks in the same space sharing the Zacks Rank with Total System are Visa Inc. V, Western Union Co. WU and Green Dot Corp. GDOT. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Visa surpassed estimates in each of the last four reported quarters with an average positive surprise of 8.13%.

Green Dot beat estimates in each of the last four reported quarters with an average positive surprise of 26.9%.

Western Union delivered positive surprises in three of the last four reported quarters with an average positive surprise of 9.1%.

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