Will Higher Costs Hurt Global Payments' (GPN) Q2 Earnings?
Global Payments Inc. GPN is set to report its second-quarter 2023 results on Aug 1, before the opening bell.
What Do Estimates Say?
The Zacks Consensus Estimate for second-quarter earnings per share of $2.58 suggests a 9.3% increase from the prior-year reported figure of $2.36. The consensus mark witnessed no movement in the past week. The consensus mark for second-quarter revenues of $2.2 billion indicates a 6.3% increase from the year-ago reported figure.
Global Payments beat the consensus estimate for earnings in one of the prior four quarters, met once and missed on the other two occasions, the average surprise being 0.7%. This is depicted in the graph below:
Global Payments Inc. Price and EPS Surprise
Global Payments Inc. price-eps-surprise | Global Payments Inc. Quote
Before we get into what to expect for the to-be-reported quarter in detail, it is worth taking a look at GPN’s previous-quarter performance first.
Q1 Earnings Rewind
In the last reported quarter, the leading payment technology company’s adjusted earnings of $2.40 per share beat the Zacks Consensus Estimate by 4.4% due to solid contributions from its merchant and core issuer businesses. The merchant business benefited from its expanding presence across worldwide markets. However, an elevated expense level partly offset the upside.
Let’s see how things have shaped up prior to the second-quarter earnings announcement.
Q2 Factors to Note
In the second quarter, profits from GPN’s Merchant Solutions — its biggest operating segment — are likely to have increased from global constant currency volume growth and resilient customer spending. Increased travel and entertainment-related spendings are expected to have benefited the company’s performance.
Our estimate for adjusted revenues from Merchant Solutions indicates an around 18% increase from the year-ago period’s reported number. The strong software businesses and continued execution of a technology-enabled strategy are likely to have aided the segment’s results. We expect adjusted operating income from the segment to jump around 15% in the second quarter.
Our estimate for Issuer Solutions’ adjusted revenues signals 3% year-over-year growth from that reported in the second quarter of 2022. Core issuer constant-currency growth and its expanding commercial card transactions are likely to have aided the segment in the quarter under review. We expect adjusted operating income from the unit to rise over 11% in the second quarter.
The above-mentioned factors are expected to have positioned GPN for year-over-year growth. However, our estimate for adjusted revenues from the Consumer Solutions segment is pegged at $25 million, indicating a massive year-over-year decrease due to the divestment of assets and higher unemployment assistance benefits.
Profits from the businesses are likely to have been partially offset by increased costs under certain heads in the second quarter, making an earnings beat uncertain. Selling, general and administrative expenses are likely to increase 4.5% year over year. We expect depreciation and amortization to increase more than 8% in the quarter. Continuous investments to upgrade digital capabilities are anticipated to have weighed on the margins.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Global Payments this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company’s Earnings ESP is +0.90%. This is because the Most Accurate Estimate is pegged at $2.60 per share, higher than the Zacks Consensus Estimate of $2.58.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Global Payments currently carries a Zacks Rank #4 (Sell).
Stocks to Consider
While an earnings beat looks uncertain for Global Payments, here are some companies from the broader Business Services space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
Everi Holdings Inc. EVRI has an Earnings ESP of +4.17% and is a Zacks #1 Ranked player at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Everi’s bottom line for the to-be-reported quarter is pegged at 24 cents. The consensus estimate has witnessed two upward revisions in the past month against no movement in the opposite direction. Furthermore, the consensus mark for EVRI’s revenues is pegged at $207.8 million, implying 5.4% year-over-year growth.
PagSeguro Digital Ltd. PAGS currently has an Earnings ESP of +2.97% and a Zacks Rank of 2.
The Zacks Consensus Estimate for PagSeguro’s bottom line for the to-be-reported quarter is pegged at 25 cents per share, which has been unchanged over the past month. PAGS beat estimates in the past four quarters, with an average surprise of 36.7%.
DLocal Limited DLO presently has an Earnings ESP of +12.50% and a Zacks Rank of 2.
The Zacks Consensus Estimate for DLocal’s bottom line for the to-be-reported quarter is pegged at 13 cents per share, which suggests a 30% year-over-year jump. DLO’s revenues are pegged at $151.2 million, suggesting 49.4% year-over-year growth.
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Global Payments Inc. (GPN) : Free Stock Analysis Report
Everi Holdings Inc. (EVRI) : Free Stock Analysis Report
PagSeguro Digital Ltd. (PAGS) : Free Stock Analysis Report
DLocal Limited (DLO) : Free Stock Analysis Report
