Global Payments Inc. GPN is set to grow in the long run on the back of an uptrend in electronic as well as integrated payments.
The company’s intensified focus on strengthening its software-driven payments makes it stand out in the industry. Ongoing investments in technology led to the transition in its business mix toward technology enablement, which is expected to represent 60% of revenues (up from 30% in 2015) and fuel significant growth by the end of 2020 with a balanced portfolio across owned SaaS, partnered software, and e-commerce and omnichannel assets.
The acquisitions of APT in 2012, PayPros in 2014 and Heartland in 2016 also expanded the company’s technology platform. Very recently, it extended its open software arm with the buyouts of AdvancedMD and SICOM. The company’s robust technology solutions will continue to set its class apart from the rest in the marketplace and position it well for consistent progress.
Another major long-term catalyst for the company is its takeover of Total System Services, one of the largest providers of card issuer solutions to financial institutions. The deal gave it ample exposure to the fast-emerging markets globally with physical and virtual presence in more than 100 countries. The highly complementary nature of these leading payments-focused businesses provides substantial revenue enhancement opportunities. The company expects to realize $350-million worth expense synergies over the next three years (2020-2023). It also anticipates reaping at least $125 million of annual run rate revenue benefits over the same period.
Recently, Truist Financial Corporation TFC selected Global Payments to be the credit card processing service provider of its combined businesses including the bank’s consumer, commercial and small business credit card portfolios through the Global Payments’ Total Systems Services (TSYS) issuer solutions unit. Truist is expected to begin conversion-related activities in late 2021 to start using Total System’s issuer processing services in 2022.
Moreover, the company resorted to cost-reduction measures by saving on travel and entertainment expenditure, marketing costs and executive pay. Further, the company plans to curtail operating expense by an additional $400 million annually.
Its strong balance sheet and liquidity position lend its business with financial flexibility to tide over the challenging times.
In three months’ time, the stock has gained 2.1% compared with its industry’s growth of 6.6%.
Global Payments currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are Equifax Inc. EFX and Green Got Corporation GDOT, each presently carrying a Zacks Rank #2 (Buy). Earnings of both Equifax and EVOP Payments beat estimates in each of the trailing four quarters, the average being 4.23% and 31.32%, respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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