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Global Payments (GPN) Q1 Earnings Beat Despite Coronavirus Woes

Zacks Equity Research
·4 min read

Global Payments, Inc. GPN came up with first-quarter 2020 adjusted earnings of $1.58 per share, beating the Zacks Consensus Estimate by 9.7% and also improving 17.9% year over year.

The quarterly results reflect higher revenues, driven by the acquisition of Total System made in second-quarter 2019, partly offset by an increase in expenses.

The company’s first-quarter results bettered the projections provided in its early-April announced preliminary results wherein it estimated 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.

Adjusted revenues of $1.73 billion inched up 0.2% year over year but missed the Zacks Consensus Estimate by 1%.

Global Payments Inc. Price, Consensus and EPS Surprise

Global Payments Inc. Price, Consensus and EPS Surprise
Global Payments Inc. Price, Consensus and EPS Surprise

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

Segmental Strength

Merchant Solutions: Adjusted revenues of $1.10 billion increased 1.7% year over year. Operating income of $500.4 million was up 46.9% year over year.

Issuer Solutions: Adjusted net revenues plus network fees of $459 million rose 0.7% year over year. Operating income of $174.6 million increased 13.1% year over year.

Business and Consumer Solution: This segment was formed after the acquisition of Total System. It reported adjusted net revenues plus network fees of $203.9 million, down 6.9% year over year. Operating income was $52.5 million, down 9.1% year over year.

Balance Sheet Position (as of Mar 31, 2020)

Total cash and cash equivalents were $1.8 billion, up 7.3% from the level as of Dec 31, 2019.

Long-term debt was $9.6 billion, up 6% from the level at 2019 end.
Net cash provided by operating activities for 2020 was $0.44 million, up 90% year over year.

Dividend Announcement

The company approved a dividend of 19.5 cents per share, payable Jun 26, 2020 to its shareholders of record as of Jun 12.

Business Update

Global Payments has been selected by Truist Financial, the sixth largest commercial bank in the United States, as a provider of issuer processing services for its combined business. This partnership will aid the company’s recently-acquired Total Systems’ Issuer business.

The company announced that it is on track to achieve at least $125 million in annual run-rate revenue synergies and a minimum of $350 million in annual run-rate expense synergies from its merger with Total System. Management stated that the integration of Total Systems remains on track

The company also undertook cost-control initiatives via which it expects to deliver an incremental $400 million of savings over the next 12 months.
Zacks Rank and Performances of Other Industry Players

Global Payments carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other companies in the same space that already reported first-quarter earnings so far include Mastercard Incorporated MA and American Express Co. AXP. The bottom-line results of both each beat the Zacks Consensus Estimate by 6.4% and 17.2% respectively, while that of Discover Financial Services DFS missed the mark by 118.4%.

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