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Global Payments (GPN) to Report Q3 Earnings: What's in Store?

Zacks Equity Research

Global Payments Inc. GPN is scheduled to report third-quarter earnings on Oct 31.

The Zacks Consensus Estimate for the company’s earnings per share is pegged at $1.66, indicating an increase of 15.3% from the year-ago quarter reported figure. The consensus mark for revenues is pegged at $1.16 billion, suggesting an increase of 12.94% from the year-ago quarter reported figure.

In the last reported quarter, Global Payments came up with adjusted earnings of $1.51 per share, beating the Zacks Consensus Estimate by 3.4% and improving 17.1% year over year, led by higher revenues, partly offset by increase in expenses.

Factors at Play

Global Payments' performance in the to-be-reported quarter is likely to have benefited from increase in payments processing volumes and merchant services volumes growth. The growth is also expected to have aided U.S. direct business.

The company’s worldwide ecommerce and omni-channel businesses, which are its important growth drivers, are likely to have boosted its performance in the third quarter. Notably, adjusted net revenues plus network fees for this business has more than doubled over the past three years and the trend is likely to have continued in the to-be-reported quarter.
Global Payments commitment to expand presence in the fast-growing payments market with attractive fundamentals might have led 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, in late 2018. 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 likely to have risen. Currently, the company’s debt-to-equity ratio is 123% compared with the industry average of 70%.

The company expects AdvancedMD and SICOM to contribute $100 million to $125 million to adjusted net revenues in 2019. We expect part of this to have been accrued in the third quarter of 2019 in its direct business.

Global Payments wholesale business, however, is likely to have declined in the third quarter due to its strategy to pivot away from this business. Revenues from its Canada business are also expected to have suffered due to a weak Canadian dollar in the to-be-reported quarter.

Recent protests in Hong Kong are likely to have dampened growth in Asia in the third quarter. Also, weak macroeconomic environment in the UK is expected to have impacted business from this region in the to-be-reported quarter.

Share repurchases made by the company might have aided the bottom line.

Earnings Surprise History

The company has an attractive earnings surprise history and has surpassed estimates in each of the trailing four quarters with an average positive surprise of 2.53%. This is depicted in the chart below:

Global Payments Inc. Price and EPS Surprise

Here is what our quantitative model predicts:

Our proven model does not conclusively predict an earnings beat for Global Payments this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.26%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, the company carries a Zacks Rank #3.

Stocks to Consider

WEX Inc. WEX with an Earnings ESP of +1.24% and a Zacks Rank #3.

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

Fidelity National Information Services, Inc. FIS has an Earnings ESP of +0.13% and a Zacks Rank of 3.

Voya Financial, Inc. VOYA has an Earnings ESP of +0.05% and a Zacks Rank of 3.

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