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Global Payments (GPN) Q4 Earnings: What’s in the Cards?

Zacks

Global Payments Inc.’s GPN fourth-quarter earnings scheduled for Feb 13, 2019, should reflect revenue and earnings growth.

The Zacks Consensus Estimate for earnings and revenues are pegged at $1.32 per share and $1.04 billion, respectively, pointing to year-over-year growth of 23.4% and 10.6%, respectively.

Factors Affecting Q4 Results

The company has witnessed revenue growth for the past several quarters and the trend is expected to continue in the to-be-reported quarter, led by accretion from the merger with Heartland Payments, other alliances and joint ventures. Moreover, there is ever-increasing demand for electronic payment transactions, which provide the company abundant scope for top-line growth.

Global Payments is witnessing ongoing strength in its worldwide e-commerce and omni solutions business, led by substantial technology investments and partnerships with leading institutions across the globe. The company expects its ecommerce and omnichannel solutions business to generate approximately $520 million in adjusted net revenue plus network fees in 2018. This represents high-teens organic growth in constant currency.

Global Payments completed the acquisition of AdvancedMD,a leading provider of cloud-based software as a service, or SaaS solutions, to small-to-medium-sized physician practices in the United States and SICOM, recently. These acquisitions were funded by a combination of cash on hand and existing revolving credit facility.

As a result of these transactions, pro-forma leverage must have gone up. Currently, the company’s debt-to-equity ratio is 115% compared with the industry average of 63%. The increase in leverage will also lead to higher interest expense in the fourth quarter. The company, however, expects AdvancedMD and SICOM to contribute adjusted net revenues of $45 million to $50 million, respectively, in the fourth quarter.

Global Payments derives nearly 30% of its revenues from international operations, which include Europe and the Asia Pacific. Therefore, it remains exposed to changes in currency exchange rates. In 2017, currency exchange movements hurt revenues by 1.3%.

The company’s earnings will continue to be affected by currency volatility, which is expected to prevail in the fourth quarter. The company expects foreign exchange to be a year-over-year headwind to adjusted net revenues plus network fees of approximately 100 to 200 basis points in the fourth quarter.

Company’s Guidance

For 2018, adjusted earnings are now anticipated in the range of $5.12-$5.22. The bottom line translates into 28-30% growth over the level in 2017. Adjusted revenues are estimated between $3.96 billion and $3.98 billion, up 15% year over year. Adjusted operating margin for 2018 is projected to grow 120 basis points.

Earnings Surprise History

The company boasts an attractive earnings surprise history. It beat estimates in each of the last four reported quarters, with an average positive surprise of 3.97%. This is depicted in the chart below:

Here is what our quantitative model predicts:

Global Payments Inc. Price and EPS Surprise


Our proven model does not conclusively show that Global Payments is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: Global Payments has an Earning ESP of -0.19%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Global Payments carries a Zacks Rank #4. We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some other stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.

Bank of Montreal BMO is expected to release results on Feb 26. The company has an Earnings ESP of +0.30% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ares Capital Corp. ARCC is scheduled to report earnings on Feb 12. It has an Earnings ESP of +1.10% and carries a Zacks Rank #3.

Garrison Capital Inc. GARS has an Earnings ESP of +11.94% and has a Zacks Rank #2. It is set to release quarterly numbers on Mar 5.

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