Global Payments Marginally Misses

Zacks

Electronic transaction processor Global Payments Inc. (GPN), reported relatively modest fiscal 2013 third-quarter (ended Feb 28, 2013) results with recurring earnings of $67.9 million or 87 cents per share compared with $65.3 million or 83 cents per share in the year-earlier quarter. Although earnings per share in the reported quarter increased year over year, it marginally missed the Zacks Consensus Estimate of 88 cents.

GAAP EPS for the reported quarter came in at 75 cents per share compared with 73 cents in the third quarter of 2012.

Total quarterly revenue increased 8% year over year to 578.7 million, marginally below the Zacks Consensus Estimate of $579 million. The healthy top-line growth is attributable to successful collaboration with financial institutions and other payment service providers, new product launches and further innovation in core business along with investments in technology infrastructure. Operating margin for the reported quarter declined 1.6% to 15.68% compared with the  year-ago quarter.

Region Wise Revenue

All geographic regions except Canada witnessed healthy growth as discussed hereunder.

United States: Revenue in this region was up 11% compared with the year-ago quarter.

North America Merchant Services: Revenue was up 8% compared with the year-ago quarter, aided by US transaction growth of 10%. Global Payments reported operating margin of 15.5% in the reported quarter compared with 17.3% in the year-ago quarter.

Canada: Revenues for this quarter declined 6% year over year.

Europe: This region posted strong revenue growth of 13% compared with the year-ago period.

Asia-Pacific: Revenues were up a modest 2% year over year as volumes failed to pick up in this region.

International Merchant: Revenues in this region grew 10% year over year. Operating margin in this quarter declined 160 basis points to 35.6% compared with the year-ago quarter.

Financial Position

Cash and cash equivalents were $682.96 million at quarter end, while long-term debt was $883.5 million. Cash from operating activities was $204.8 million during the first nine months of fiscal 2013 compared with a negative $226.8 million in the comparable period in the previous fiscal. Capital expenditure in the period came in at $21 million.


Fiscal Outlook Reaffirmed

For fiscal 2013, management believes that it will be able to meet its earlier annual revenue guidance of $2.36 billion to $2.40 billion, representing a 7% to 9% year-over-year increase. It expects EPS in the range of $3.64 to $3.71. However, management expects GAAP EPS in the range of $2.87 to $2.94. Tax rate is expected to be 28.5%.

Some of the other players in the sector worth mentioning are Alliance Data (ADS), Fiserv Inc (FISV) and Vantiv Inc-A (V), each carrying a Zacks Rank #2 (Buy). Global Payments currently has Zacks Rank #3(Hold).
 

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