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Why Is Global Payments (GPN) Down 4.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Global Payments (GPN). Shares have lost about 4.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Global Payments due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Global Payments Q2 Earnings Beat, Revenues Rise Y/Y

Global Payments Inc. earnings per share of $2.04, beat the Zacks Consensus Estimate by 7.9%. The bottom line surged 56% year over year.
Adjusted net revenues of $1.9 billion improved 28% year over year in the second quarter. The top line beat the consensus mark by 4.8%.

Adjusted operating margin improved 480 basis points (bps) year over year to 41.8% in the quarter under review.

The company’s results hint toward growing revenues, courtesy of strong segmental contributions across its Merchant Solutions, Issuer Solutions, and Business and Consumer Solutions units. However, escalating operating costs partly dampened the company’s bottom-line growth.

Total operating expenses of $1.8 billion climbed 13.5% year over year due to higher cost of service, and increased selling, general and administrative costs.

Segmental Performances

Merchant Solutions: The segment reported adjusted revenues of $1.3 billion, which climbed 42.3% year over year. Operating income of $624.7 million soared 68.2% year over year.

Issuer Solutions: Adjusted net revenues improved 7.8% year over year to $446.4 million. Operating income of nearly $196 million advanced 10.6% year over year.

Business and Consumer Solutions: Adjusted net revenues of this segment amounted to $227.4 million, which rose 4.9% year over year. However, operating income of $61.2 million slumped 12.7% year over year.

Balance Sheet Position (as of Jun 30, 2021)

Global Payments exited the second quarter with cash and cash equivalents of $1.8 billion, which fell 7.5% from the level at 2020 end.

Long-term debt of $10.2 billion increased 20.7% from the 2020-end level.
For the six months ended Jun 30, 2021, net cash provided by operating activities grew 15.6% from the prior-year comparable period to $1.1 billion.

Share Repurchase and Dividend Update

The company’s board of directors has enhanced its share repurchase authorization to $1.5 billion.

Concurrently, management approved a 28.2% hike in the quarterly dividend based on which the company will now pay out a dividend of 25 cents per share compared with the prior payout of 19.5 cents. The increased dividend will be paid on Sep 24, 2021 to shareholders of record as on Sep 10.

Business Update

Global Payments recently agreed to purchase the payments businesses of Bankia from its CaxiaBank’s partners. The move will strengthen the European footprint of Global Payments.

The company inked a new partnership with Amazon Web Services as a result of which unique distribution and innovative technologies will be offered at Netspend, a Global Payments company.

The company completed the buyout of the leading software and payments technology company Zego, which is expected to bolster the former’s presence across the real estate platform.

2021 Guidance

Based on strong second-quarter results and favorable business trends, Global Payments revised its 2021 outlook with respect to adjusted net revenues and adjusted EPS.

The company now projects adjusted net revenues to be $7.70-$7.73 billion for this year, up from the previous guidance of $7.550-$7.625 billion. The newly provided outlook indicates 14-15% growth from the 2020 reported figure.

Adjusted EPS is anticipated to lie within $8.07 and $8.20, up from the prior view of $7.87-$8.07. The new guidance suggests 26-28% improvement from the year-ago reported figure.


How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, Global Payments has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Global Payments has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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