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Global Payments Cancels 2020 Earnings View Amid Coronavirus Chaos

Zacks Equity Research
·4 min read

Gobal Payments Inc. GPN, a leading worldwide provider of payment technology and software solutions, has provided a business update on the impact of the coronavirus breakout.

The company’s performance in January, February and through the first two weeks of March was better than its own expectation. However, its business started to deteriorate toward the end of March when large-scale lockdown and social distancing measures were adopted across North America and Europe to contain the spread of the pandemic. The continued spread of this deadly virus to greater number of countries and localities is persistently hampering the company’s operations.

Consequently, Global Payments now expects adjusted net revenues for the first quarter to be up slightly on a combined basis and adjusted earnings per share to grow approximately in mid-teens compared with the prior year on constant currency basis. In the first quarter of 2019, the company’s adjusted revenues and earnings per share grew12.9% and 18.6%, respectively.

For the first quarter of 2020, the company’s expectation of GAAP revenues and GAAP earnings per share trends indicates almost in-line results with the fourth-quarter 2019 reported figures. We note that in the fourth quarter, the company’s GAAP revenues increased 125.7% but EPS declined 27.7%.

Management also suspended its earlier-provided guidance for 2020, citing lack of clarity in accurately gauging the economic impact of the COVID-19 pandemic on its business. The company previously expected adjusted net revenues in the range of $7.68-$7.75 billion, suggesting 8-9% growth from the 2019 reported figure and adjusted earnings per share in the $7.43-$7.62 band, implying 20-23% growth from the prior-year reported number.

The company also hinted at maintaining its costs to protect margins since its top line is already under pressure.

Earlier in March, it came out with its first review of the COIVD impact on its business. It then kept its full-year earnings guidance intact with management stressing the point that there was no major negative impact on Europe, America, Australia and New Zealand businesses.

However, the company estimated a headwind of nearly $15-million to its Asia-Pacific business, which is about an 80-basis point on its first-quarter revenue growth. Yet at the same time, management stated that this revenue hemorrhage will not affect the company’s operating performance.

The company confirmed that it is better placed as travel and entertainment (T&E) business, which was the worst-hit due to random trip cancellations to prevent the spread of the coronavirus-caused uncertainty, accounts for a very small portion (nearly 2%) of its revenues globally.

Moreover, part of the company’s business, which is derived from healthcare (nearly $2 billion) is pretty resilient and does not depend on the underlying health of the consumer on a day-to-day basis. Thus, any kind of unexpected dent in revenues will be handled by the company comfortably.

The company also highlighted its endurance during the last economic depression (2008), during which Total System’s issuer processing grew and Global Payments posted mid-single-digit growth.

Akin to its peers, Global Payments too has not gone unscathed by the coronavirus-induced business loss and now it enters the bracket of other payments stocks, namely Matsercard Incorporated MA, Visa Inc. V and American Express Co. AXP that either withdrew or lowered their 2020 earnings guidance.

Year to date, the stock has lost 21.3% compared with its industry’s decline of 22.6%.

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

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