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Global Payments (GPN) Q4 Earnings Beat, Share Buyback Raised

Zacks

Global Payments Inc. GPN came up with fourth-quarter 2017 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate of $1.01 and improving 23% year over year.

Better-than-expected earnings were primarily due to higher revenues across its markets.

Global Payments posted revenues of $939 million, which missed the Zacks Consensus Estimate of $942 million but grew 23% year over year.

Total operating expense of $904.7 million increased 4% year over year due to an increase in cost of service.


Adjusted operating margin improved 580 basis points to 14.2%.

Growth Across Segments

North America: Revenues of $687.7 million increased 14.4% year over year. Operating income of $206.2 million was up 17.8% year over year.

Europe: Revenues of $173.9 million grew 17.2% year over year. Operating income of $83.3 million increased 22.1% year over year.

Asia-Pacific: Revenues of $77.4 million increased 10.6% year over year. Operating income of $26.4 million was up 25.7% year over year.

Strong Financial and Balance Sheet Position

Total cash and cash equivalents as of Dec 31, 2017 were $1.34 billion, up from $1.16 billion as of Dec 31, 2016.

Long-term debt as of Dec 31, 2017 was $4.6 billion, 7% higher year over year.

The company also approved a quarterly dividend of 1 cent per share payable Mar 30, 2018. The board also approved an increase in the company’s existing share repurchase program authorization to $600 million.

2018 Guidance

For 2018, the company expects adjusted earnings of $4.95 to $5.15 per share (up 23% to 28% year over year) and adjusted net revenues between $3.88 billion and $3.97 billion (up 12% to 15% year over year). Adjusted operating margin is expected at 31.5%.

Adoption of Accounting Standards Codification Topic 606 (ASC 606)

Effective Jan 1, 2018, the company has adopted ASC 606, pursuant to which revenues will now be reported net of fees paid to payment networks compared with being reported on gross basis earlier. Also, GAAP revenues associated with the company’s gaming cash advance products will now be reported net of associated commissions paid to casinos. However, these changes will be not leave any impact on the bottom line.

As a result of ASC 606, the netting of casino commissions reduced 2017 reported amounts by approximately $68 million and will likely impact 2018 by an estimated $73 million.

Business Update

Global Payments announced a joint venture with HSBC in Mexico.

Our Take

The company’s strong results reflect its effective business execution and growth from acquisitions. We believe its investments will help in enhancing digital capabilities and improving the balance sheet, which will drive long-term growth.

Zacks Rank and Other Performances

Global Payments carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

From the same space, Mastercard Inc. MA, Total System Services Inc. TSS and Alliance Data Systems Corp. ADS beat their respective fourth-quarter estimates by 1.79%, 2.67% and 29.2%.

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