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Total System (TSS) to Report 1Q Earnings: Will It Beat?

Zacks Equity Research

Total System Services, Inc. TSS will issue its first-quarter earnings report on Apr 23. The company is expected to report earnings per share of $1.16 on revenues of $1 billion, which translates into year-over-year growth of 2.65% and 7.04%, respectively.

In the last reported quarter, the company’s earnings per share came in at $1.08, which beat the estimate by 1.89%, on the back of strong performances in all three segments.

Let’s see the factors affecting Q1 results:

In the first quarter, the company will have faced some headwinds from non-recurring items in the year-ago quarter and non-renewal of its non-traditional account-on-file and government accounts in 2019. Per the Zacks Consensus Estimate, Total Accounts on File is 757 million, indicating a 6.6% decline from the year-ago reported figure.

Notably, the company has seen consistent revenue growth over the past several years. It has witnessed a CAGR of 15% from 2014 to 2018. We believe, the company should retain its revenue momentum in the coming release on the back of a strong market position and attractive core business that continues to be driven by new deals, renewed agreements, accretive acquisitions and expansion of service offerings.

The company’s Consumer Solution segment is likely to deliver revenue growth from an increase in gross dollar volume and higher debit active cards. Contract extensions of several significant partnerships, signed recently, should drive the top line.

In the company’s Merchant Solutions segment, the continued shifting of business mix toward integrated payments should aid revenues. The acquisition of Cayan, completed last year, should be accretive to the segment’s earnings.

Also, as a result of the company’s accelerated deleveraging and strong free cash flow position, it resumed its share repurchase activity in the fourth quarter. This activity, in the first quarter, will be accretive to its bottom line.

Earnings of the company should likely be offset to some extent by investments made to enhance its infrastructure, longer-term product offerings and technological capabilities.

Earnings Surprise History

The company has an impressive earnings surprise history, having surpassed estimates in each of the four reported quarters, with an avearge positive surprise of 6.31%. This is depicted in the chart below:

Total System Services, Inc. Price and EPS Surprise

Total System Services, Inc. Price and EPS Surprise | Total System Services, Inc. Quote

Why a Positive Surprise Likely?

Our proven model indicates that chances of Total System beating the Zacks Consensus Estimate are high as it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The Earnings ESP for Total System is +0.10%.

Zacks Rank: Total System currently has a Zacks Rank #3, which increases the predictive power of ESP.

Other Stocks That Warrant a Look

Here are some other companies that you may consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:

Discover Financial Services DFS has an Earnings ESP of +0.59% and a Zacks Rank #3. The company will report first-quarter earnings results on Apr 25.

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

Diebold Nixdorf, Inc. DBD has an Earnings ESP of +5.71% and a Zacks Rank #2 (Buy).

RenaissanceRe Holdings Ltd. RNR has an Earnings ESP of +2.71% and a Zacks Rank #2.

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Diebold Nixdorf, Incorporated (DBD) : Free Stock Analysis Report
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Total System Services, Inc. (TSS) : Free Stock Analysis Report
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