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Global Payments (GPN) Up 0.9% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Global Payments (GPN). Shares have added about 0.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Global Payments due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Global Payments Q4 Earnings Beat Estimates, Rise Y/Y

Global Payments's fourth-quarter 2020 adjusted earnings of $1.80 per share beat the Zacks Consensus Estimate by 1.7%. Also, the bottom line improved 11.1% year over year.

Adjusted net revenues declined 2.9% year over year to $1.75 billion. Moreover, the top line missed the Zacks Consensus Estimate by 0.6%.

Total expenses were down 6.3% year over year to $1.68 billion owing to lower cost of service.

The company’s results reflect constant market recovery and cost-control efforts, which have been driving margins for a while. However, this upside is partially offset by softer revenues across other two segments barring Business and Consumer Solutions.

Full-Year Update

Adjusted net revenues dipped 5.2% to $6.75 billion. Adjusted earnings per share inched up 2.9% to $6.40.

Segmental Performances

Merchant Solutions: Adjusted revenues of $1.11 billion decreased 4.2% year over year. Operating income of $528.1 million was up 1.1% year over year.

Issuer Solutions: Adjusted net revenues of $457 million slid 0.4% year over year. Operating income of $204 million increased 10.5% year over year.

Business and Consumer Solution: Adjusted net revenues came in at $204.7 million, up 2.6% year over year. Operating income was $49.4 million, up 15.5% year over year.

Balance Sheet Position (as of Dec 31, 2020)

Total cash and cash equivalents were $1.95 billion, which surged 15.9% from the level as of Dec 31, 2019.

Long-term debt was $8.5 billion, down 6.7% from the level at 2019 end.
Share Repurchase and Dividend Update

The board of directors cleared a dividend of 19.5 cents per share, payable Mar 26, 2021 to its shareholders of record as of Mar 12, 2021 and also approved an increase in the company’s existing authorization of its share buyback program, raising the total available stock to $1.5 billion.

As part of that plan, it intends to execute an accelerated share repurchase program for $500 million in the coming days.

Net cash provided by operating activities in 2020 was $2.3 billion, up 66% year over year.

2021 Guidance

The company expects 2021 adjusted net revenues in the range of $7.50-$7.60 billion, indicating growth of 11-13%. Adjusted earnings per share are likely to be in the $7.75 and $8.05 band, suggesting growth of 21-26% from the 2020 reported figure.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.21% due to these changes.

VGM Scores

At this time, Global Payments has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Global Payments has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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