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Global Payments Up 78% YTD: Will Momentum Continue in 2020?

Zacks Equity Research

Global Payments Inc. GPN has been in investors’ good books, owing to its consistently strong operating performance, solid business fundamentals and growing market share in the payments services industry. Its solid capital position is another positive.

The Zacks Consensus Estimate for the company’s earnings has been revised 1.1% and 4.6% upward over the past 60 days for 2020 and 2021.
Out of the 15 analysts tracking the stock, 13 made an upward revision to the earnings estimates for 2019 and 2020.

Shares of this Zacks Rank #2 (Buy) stock have gained 77.9% compared with its industry’s growth of 45.4%. In 2018, the stock rose just 2.9% compared with its industry’s growth of 5.5%.

 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Factors Likely to Drive Growth

Global Payments announced a 10-year strategic partnership with Desjardins Group, Canada’s leading     financial     co-operative group and                                                                                                     another agreement with Citi, one of the largest money center banks globally.

The agreement with Desjardin calls for the purchase of the Quebec-based bank’s existing portfolio of approximately 40,000 merchants and execution of referral partnership to provide acquiring solutions to clients for the next decade.

Global Payments has partnered with Citi to offer payment acceptance services to its multinational banking clients on an omni-channel basis.

The company also signed several significant global omnichannel customers including the UK based online luxury retailer, MATCHESFASHION and a rapidly expanding modern high-tech hotel chain, Eurotel.

These deals should aid the company’s revenues in 2020.

The company’s Issuer Solutions business recently completed new long-term agreements with the Central Trust Bank in North America and leading retailer Riachuelo in Brazil.  It also extended contracts with Virgin Money Nationwide Building Society and Metro Bank. The company expects to accelerate growth in this business by modernizing its platforms, cross-selling existing relationships globally and extending the product suite. Notably, the issuer solutions team successfully converted the Walmart portfolio on behalf of Capital One in October.

In its Consumer Solutions business, the company announced partnership with Samsung to integrate the Netspend digital MasterCard into Samsung’s mobile wallet and provide a variety of payment solutions including peer to peer (P2P), which will open a significant pool of new customers.

The company’s differentiated strategy at Netspend consists of product extensions into P2P and business-to-business (B2B) segments as well as select international expansion. It is building product offerings currently to enhance the scale and scope of Netspend's B2B offerings.

The merger with Total System is expected to result in cross-selling opportunities, add to Global Payment’s scale and size and boost its 2020 earnings. The company expects to accelerate revenue growth and deliver substantial cost savings over the next three years and beyond.

The company expects at least mid-single-digit accretion in 2020, which would imply adjusted earnings per share expectation in the mid-$7 range based on its stand-alone 16% to 18% growth target.

The Zacks Consensus Estimate for 2020 earnings indicates 21.8% year-over-year rise on revenue increase of 63.7%.

Other Stocks to Consider

Some other stocks worth considering are Mastercard Incorporated MA, Cardtronics PLC CATM and QIWI PLC QIWI. While Cardtronics and QIWI sport a Zacks Rank #1 (Strong Buy), Mastercard carries a Zacks Rank #2. Mastercard, Cardtronics and QIWI have surpassed estimates in the last reported quarter by 12.9%, 46.9% and 6.97%, respectively.

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