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Global Payments (GPN) to Post Q2 Earnings: What's in Store?

Zacks Equity Research

Global Payments Inc. GPN second-quarter earnings, scheduled to be reported on Jul 30, should benefit from multiyear investments made in distribution and technology.

According to the Zacks Consensus Estimate, revenues and earnings for the to-be-reported quarter should grow by 12.5% and 13.2%, respectively, to $1.11 billion and $1.46 per share.

The company’s results in the second quarter are likely to benefit from increase in payments processing volumes and merchant services volumes growth, which should lead to higher revenues from its U.S. direct business.

The company’s worldwide ecommerce and omni-channel business, which are its important growth strategies, should help to continue its track of strong growth in the second quarter. Notably, adjusted net revenues plus network fees for this business has more than doubled over the past three years and we expect the trend to continue in the to-be-reported quarter..

The company’s commitment to expand presence in the fast growing payments market with attractive fundamentals, should lead to business growth.

Global Payments completed the acquisition of AdvancedMD, a leading provider of cloud-based software as a service, or SaaS solutions, to small-to-medium-sized physician practices in the United States and SICOM, recently. These acquisitions were funded by a combination of cash on hand and existing revolving credit facility.  As a result of these transactions, pro-forma leverage is expected to rise. Currently, the company’s debt to equity ratio is 123% compared with the industry average of 75%. The increase in leverage will also lead to higher interest expense in the second quarter.

The company, however, expects AdvancedMD and SICOM to contribute adjusted net revenues of $100 million to $125 million for the full year 2019. We expect a part of this to accrue in the second quarter of 2019 in its direct business.

The company’s wholesale business, however, is likely to decline due to its strategy to pivot away from this business.  Revenues from its Canada business are also expected to suffer due to a weak Canadian dollar in the to-be-reported quarter.

Overall, adverse exchange rates are expected to negatively impact revenues.

Share repurchases made by the company should provide an extra cushion to the bottom line.

Earnings Surprise History

The company has an attractive earnings surprise history and has surpassed earnings estimates in each of four of the trailing four quarters with an average positive  surprise of 3.11%. This is depicted in the chart below:

Global Payments Inc. Price and EPS Surprise


Global Payments Inc. Price and EPS Surprise

Global Payments Inc. price-eps-surprise | Global Payments Inc. Quote


Here is what our quantitative model predicts:

Our proven model conclusively shows that Global Payments is likely to beat estimates this earnings season. This is because the stock has the right combination of a positive Earnings ESP and a favorable Zacks Rank.

Earnings ESP: Global Payments has an Earnings ESP of +8.40%. This is because the Most Accurate Estimate is pegged at $2.70, higher than the Zacks Consensus Estimate of $2.49. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Global Payments sports a Zacks Rank #1 (Strong Buy), which increases the predictive power of ESP. Along with a positive ESP in the combination, chances of an earnings beat are significantly higher in the to-be-reported quarter.

Some other stocks worth considering are:

Mastercard Inc. MA with an Earnings ESP of +0.55% and a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Total System Services, Inc. TSS has an Earnings ESP of +.97% and a Zacks Rank of 2 (Buy).

Green Dot Corp. GDOT has an Earnings ESP of +.89% and a Zacks Rank of 3.

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