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Global Payments Rides on Software-Driven Payments Business

Zacks Equity Research
·3 min read

Global Payments Inc. GPN is set to grow in the long run on the back of increased global consumption and an uptrend in electronic payments as well as integrated payments.

The company’s intensified focus on strengthening its software-driven payments makes it stand out in the industry. Ongoing investments in technology led to the transition in the company’s business mix toward technology enablement, which is expected to represent 60% of the company’s revenues (up from 30% in 2015) and fuel significant growth by the end of 2020 with a balanced portfolio across owned SaS, partnered software, and e-commerce and omnichannel assets.

The acquisitions of APT in 2012, PayPros in 2014 and Heartland in 2016 also expanded the company’s technology platform. Very recently, it extended its open software arm as well with the buyouts of AdvancedMD and SICOM. The company’s robust technology solutions will continue to set its class apart from the rest in the marketplace and position it well for consistent progress.

Another major long-term growth catalyst for the company is its takeover of Total System Services, one of the largest providers of card issuer solutions to financial institutions. The deal gave it ample exposure to the fast-emerging markets globally with physical and virtual presence in more than 100 countries. The highly complementary nature of these leading payments-focused businesses provides significant revenue enhancement opportunities. The company expects to realize $350 million of expense synergies over the next three years (2020-2023). It also anticipates reaping at least $125 million of annual run rate revenue benefits over the same period.

Moreover, the company resorted to cost-reduction measures by saving on travel and entertainment expenditure, marketing costs and executive pay. Further, the company has plans to curtail operating expense by an additional $400 million annually.

Recently, Truist Financial Corporation TFC selected Global Payments to be the provider of credit card processing services for its combined businesses including the bank’s consumer, commercial and small business credit card portfolios through the Global Payments’s Total Systems Services (TSYS) issuer solutions unit. Truist is expected to begin conversion-related activities in late 2021 to begin using Total System’s issuer processing services in 2022.

The company suspended its 2020 earnings guidance in the face of uncertainty related to the COVID-19 breakout. Nevertheless, its strong investment grade balance sheet and liquidity position lend its business with financial flexibility to tide over the challenging times.

In three months’ time, the stock has gained 2.1% compared with its industry’s growth of 6.6%.

Global Payments currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are EVO Payments Inc. EVOP and Green Got Corporation GDOT, each presently carrying a Zacks Rank #2 (Buy). Earnings of Green Dot and EVOP Payments beat estimates in each of the trailing four quarters, the average being 247.6% and 31.32%, respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Global Payments Inc. (GPN) : Free Stock Analysis Report
 
Green Dot Corporation (GDOT) : Free Stock Analysis Report
 
EVO Payments, Inc. (EVOP) : Free Stock Analysis Report
 
Truist Financial Corporation (TFC) : Free Stock Analysis Report
 
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Zacks Investment Research