Global Payments' (GPN) Beats on Q3 Earnings, Raises '23 EPS View
Global Payments Inc. GPN reported third-quarter 2023 adjusted earnings per share (EPS) of $2.75, which outpaced the Zacks Consensus Estimate by 1.5%. The bottom line improved 10.9% year over year.
Adjusted net revenues of $2,232.4 million rose 8.5% year over year in the third quarter. The top line beat the consensus mark by 0.4%.
The strong quarterly results gained from solid contributions from its merchant and core issuer businesses. Both businesses benefited from rising transaction volumes. However, an elevated expense level partly offsets the upside.
Global Payments Inc. Price, Consensus and EPS Surprise
Global Payments Inc. price-consensus-eps-surprise-chart | Global Payments Inc. Quote
Operating Performance
The adjusted operating income advanced 9.6% year over year to $1,019.5 million in the third quarter and beat our estimate by 0.4%.
The adjusted operating margin of 45.7% improved 50 basis points (bps) year over year but lagged our estimate by 10 bps.
Total operating expenses increased 1% year over year to $1,917.5 million in the quarter under review. The increase was due to higher selling, general and administrative expenses in the quarter. The metric surpassed our estimate by 1.1%. Interest and other expenses of $176.1 million rose 30.3% year over year and surpassed our estimate by 8.2%.
Segmental Performances
Merchant Solutions: Adjusted revenues of the segment amounted to $1,728 million, which grew 19.2% year over year in the third quarter. The improvement came from a 33% increase in new integrated partners, 20% POS growth and mid-teens growth in Central Europe and Spain. The reported figure lagged our estimate by 0.9%.
The segment’s adjusted operating income of $847.7 million improved 17% year over year and surpassed our consensus mark by 1.2%.
Issuer Solutions: The segment recorded adjusted revenues of $519.7 million, which rose 6.3% year over year in the quarter under review, thanks to core issuer constant-currency growth and an increase in traditional accounts. The figure lagged our estimate by 1.4%.
Adjusted operating income came in at $246.6 million, up 8.7% year over year, which lagged our estimate by 2.5%.
Financial Position (as of Sep 30, 2023)
Global Payments exited the third quarter with cash and cash equivalents of $1,941.8 million, which declined from $1,997.6 million at 2022-end.
Total assets of $48,924.6 million grew from $44,809 million at 2022-end.
Long-term debt amounted to $16,570.8 million, which increased from $12,289.2 million at 2022-end. The current portion of long-term debt amounted to $80 million at the end of the third quarter.
Total equity of $22,684.8 million increased from $22,540 at 2022-end.
In the first nine months of 2023, GPN generated operating cash flows of $1,591.3 million, which increased 3.7% year over year.
Capital Deployment Update
The company did not repurchase any shares in the third quarter of 2023. Management declared a quarterly dividend of 25 cents per share, which will be paid out on Dec 29, 2023, to its shareholders of record as of Dec 15.
2023 Guidance Hiked
On the basis of the robust financial results delivered in the third quarter of 2023, management hiked the 2023 guidance for some metrics.
Adjusted net revenues are currently forecasted to be between $8,660 million and $8,735 million. The midpoint of the revised outlook implies an improvement of 7-8% from the 2022 reported figure.
Adjusted net revenue growth in the Merchant Solutions segment is expected to stay around 16% in 2023. Meanwhile, the Issuer Solutions segment’s adjusted net revenues are projected to be in the 5-6% band.
Adjusted EPS is anticipated to lie between $10.39 and $10.45 this year, indicating an improvement from the previous guidance of $10.35-$10.44. The midpoint of the updated guidance suggests 11-12% growth from the 2022 figure. GPN expects to convert almost 100% of adjusted net income into adjusted free cash flow.
The adjusted operating margin is continued to be expected to increase up to 120 bps in 2023.
Zacks Rank
Global Payments currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Financial Transaction Services Players
Fiserv, Inc. FI reported impressive third-quarter 2023 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate.
Adjusted EPS (excluding 40 cents from non-recurring items) of $1.96 exceeded the consensus mark by 1% and increased 20% year over year. Adjusted revenues of $4.62 billion surpassed the consensus estimate by 0.53% and rose 8.2% year over year.
Visa Inc. V reported solid fourth-quarter fiscal 2023 results, driven by increased payments, cross-border volumes and processed transactions. Steady cross-border travel growth, resilient consumer spending and higher-than-expected data processing aided the results, partially offset by increased costs and client incentives.
The company reported fourth-quarter fiscal 2023 EPS of $2.33, which beat the Zacks Consensus Estimate of $2.23 by 4.5%. The bottom line improved 21% year over year.
Mastercard Incorporated MA reported third-quarter 2023 adjusted earnings of $3.39 per share, which beat the Zacks Consensus Estimate by 5.6%. The bottom line improved 26% year over year.
The leading technology company in the global payments industry reported net revenues of $6,533 million, which rose 14% year over year in the quarter under review. The top line outpaced the consensus mark by a whisker.
Cross-border volumes (a key measure that tracks spending on cards beyond the issuing country) improved 21% on a local-currency basis. Value-added services and solutions net revenues rose 17% year over year to $2,323 million. MA’s clients issued 3.3 billion Mastercard and Maestro-branded cards as of Sep 30, 2023.
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