Can Merchant Solutions Aid Global Payments (GPN) Q3 Earnings?
Global Payments Inc. GPN is poised to surpass third-quarter 2023 earnings expectations. The results, to be announced on Oct 31, before the market opens, are anticipated to reflect sustained growth in its Merchant Solutions and Issuer Solutions segments, contributing to its performance.
What Do the Estimates Say?
The Zacks Consensus Estimate for third-quarter earnings per share of $2.71 suggests a 9.3% increase from the prior-year figure of $2.48. The consensus mark has remained stable over the past week. The consensus estimate for third-quarter revenues of $2.2 billion indicates an 8% increase from the year-ago reported figure.
Global Payments beat estimates in two of the trailing four quarters and missed twice, delivering an average surprise of 1.1%.
What the Quantitative Model Suggests
Our proven model predicts a likely 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, which is precisely the case here.
Earnings ESP: Global Payments has an Earnings ESP of +0.07%. This is because the Most Accurate Estimate is currently pegged at higher than the Zacks Consensus Estimate of $2.71. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently has a Zacks Rank #3.
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at GPN’s previous-quarter performance first.
Q2 Earnings Rewind
In the last reported quarter, the leading payment technology company’s adjusted earnings of $2.62 per share beat the Zacks Consensus Estimate by 1.6% due to solid contributions from its merchant and core issuer businesses. Both businesses benefited from rising transaction volumes. Also, lower costs boosted the bottom line.
Now, let’s see how things have shaped up prior to the third-quarter earnings announcement.
Factors Driving Q3 Performance
In the third 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. Moreover, an increase in expenditures related to travel and entertainment is expected to have positively impacted the company's overall performance.
The Zacks Consensus Estimate for adjusted revenues from Merchant Solutions indicates an 18.7% increase from the year-ago period’s reported number, whereas our model estimates an 18.2% increase. A strong vertical market growth, sales figure growth and the EVO business acquisition are likely to have aided the segment’s results. We expect adjusted operating income from the segment to jump nearly 16% in the third quarter.
The consensus estimate for Issuer Solutions’ adjusted revenues signals a 6.6% increase from the year-ago figure, while our model indicates 7.8% growth. 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 more than 11% in the third quarter.
The above-mentioned factors are expected to have positioned GPN for year-over-year growth and an earnings beat. However, profits from the businesses are likely to have been partially offset by increased costs under certain heads in the third quarter. Adjusted selling, general and administrative expenses are likely to increase 7.5% year over year.
In the upcoming quarter, we anticipate a nearly 6% increase in adjusted cost of service. Continuous investments to upgrade digital capabilities are anticipated to have put pressure on profit margins. Additionally, adjusted total operating expenses are expected to have climbed 6.6% year over year in the third quarter.
Other Stocks That Warrant a Look
Here are some other companies worth considering from the broader Business Services space, as our model shows that these, too, have the right combination of elements to beat on earnings this time around:
Duolingo, Inc. DUOL has an Earnings ESP of +35.90% and is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Duolingo’s bottom line for the to-be-reported quarter indicates an 82.6% year-over-year improvement. The estimate remained stable over the past week. Furthermore, the consensus mark for DUOL’s revenues is pegged at $131.4 million, suggesting 36.8% growth from a year ago.
PagSeguro Digital Ltd. PAGS has an Earnings ESP of +1.96% and a Zacks Rank of 3.
The Zacks Consensus Estimate for PagSeguro’s bottom line for the to-be-reported quarter is pegged at 26 cents per share, which suggests an 8.3% year-over-year jump. The estimate remained stable over the past week. PAGS beat earnings estimates in all the past four quarters, with an average of 9.3%.
Alithya Group Inc. ALYA has an Earnings ESP of +100.00% and a Zacks Rank of 2.
The Zacks Consensus Estimate for Alithya’s bottom line for the to-be-reported quarter has remained stable over the past week. It beat earnings estimates thrice in the past four quarters and missed once, with an average surprise of 150%. The consensus mark for ALYA’s top line is pegged at $95.7 million for the to-be-reported quarter.
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Global Payments Inc. (GPN) : Free Stock Analysis Report
PagSeguro Digital Ltd. (PAGS) : Free Stock Analysis Report
Alithya Group Inc. (ALYA) : Free Stock Analysis Report
Duolingo, Inc. (DUOL) : Free Stock Analysis Report
