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Heartland Payment Upped to Buy

Zacks Equity Research

On Dec 18, Zacks Investment Research upgraded Heartland Payment Systems, Inc. (HPY) to a Zacks Rank #2 (Buy).

Why the Upgrade?

Heartland Payment has been witnessing rising earnings estimates on the back of strong third-quarter 2013 results and strategic initiatives to ramp up its growth profile. Moreover, this financial transaction service provider delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 12.4%. The long-term expected earnings growth rate for this stock is 14.7%.    

Heartland Payment reported third-quarter non-GAAP earnings per share of 62 cents, surpassing the Zacks Consensus Estimate by 11% and year ago earnings by 26%.

Earnings were primarily aided by a solid top line, improving 9.5% year-over-year. The improvement was largely fuelled by solid growth in card processing, surge in Payroll, solid contribution from Campus Solutions and a substantial improvement in Micropayments.

Small and mid-sized enterprise (:SME) quarterly transaction processing volume was $19.6 billion, up 3.9% year over year in the reported quarter.

Heartland Payment spent $6 million to buy back 0.2 million shares in the third quarter.

Moreover, Heartland Payment expects 2013 net earnings of $2.30 and $2.33 per share on revenues of $600 million and $605 million, respectively.

Heartland Payment also inked a deal with the merchant financing operations of American Express Company (AXP) – American Express Merchant Financing. This deal will make Heartland the first processor to distribute American Express Merchant Financing.

The Zacks Consensus Estimate for 2013 moved north by 7.1% to $2.10 per share, as 3 of 6 estimates were revised higher over the last 60 days. The current estimate is below the guidance range provided by Heartland Payment. For 2014 also, 3 of the 6 estimates were revised higher over the same time frame, lifting the Zacks Consensus Estimate by 2.7% to $2.30 per share.

Other Stocks to Consider

Other financial transaction service providers which look attractive at current levels include Qiwi plc (QIWI) and Alliance Data Systems Corp. (ADS). While Qiwi sports a Zack Rank #1 (Strong Buy), Alliance Data carries the same Zacks Rank as Heartland Payment.

Read the Full Research Report on HPY
Read the Full Research Report on QIWI
Read the Full Research Report on AXP
Read the Full Research Report on ADS

Zacks Investment Research