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Why Is Global Payments (GPN) Down 4.2% Since Last Earnings Report?
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It has been about a month since the last earnings report for Global Payments (GPN - Free Report) . Shares have lost about 4.2% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Global Payments Beats Q4 Earnings on LATAM Operations
Global Payments reported fourth-quarter 2023 adjusted earnings per share (EPS) of $2.65, which beat the Zacks Consensus Estimate of $2.63. The bottom line rose 10% year over year.
Adjusted net revenues improved 8% year over year to $2.19 billion. The top line surpassed the consensus mark of $2.18 billion.
The quarterly results were aided by growth in transaction volumes that led to solid contributions from the Merchant Solutions and Issuer Solutions segments. However, the upside was partly offset by an increase in overall expenses.
Operating Performance
Adjusted operating income of $978.5 million advanced 8.9% year over year in the quarter under review but fell short of our estimate of $984.5 million. Adjusted operating margin improved 30 basis points (bps) year over year to 44.8%.
Total operating expenses of $1.9 billion increased 4.9% year over year in the fourth quarter. The increase was due to higher selling, general and administrative expenses, and net gain on business dispositions. The metric came higher than our estimate of $1.8 billion. Interest and other expenses escalated 39.3% year over year to $169.7 million and outpaced our estimate of $161.6 million.
Segmental Performances
Merchant Solutions: The segment recorded adjusted revenues of $1.7 billion in the fourth quarter, which rose 18.5% year over year. The figure almost touched the Zacks Consensus Estimate. The year-over-year growth resulted from a 20% increase in new integrated partners, point-of-sale growth of 20% and double-digit organic growth across the LATAM region.
The unit’s adjusted operating income advanced 17% year over year to $797.3 million but missed the consensus mark of $817 million and our estimate of $822.6 million.
Issuer Solutions: Adjusted revenues were $530.6 million in the segment, which grew 5.8% year over year in the quarter under review and beat the Zacks Consensus Estimate of $529 million as well as our estimate of $529.6 million. The unit benefited on the back of core issuer growth, a rise in traditional accounts on file and an expanding MineralTree mid-market channel.
Adjusted operating income improved 3.8% year over year to $251 million, higher than the consensus mark of $249 million and our estimate of $242.7 million.
Financial Position (as of Dec 31, 2023)
Global Payments exited the fourth quarter with cash and cash equivalents of $2.1 billion, which grew 4.6% from the 2022-end level.
Total assets of $50.6 billion climbed 12.9% from the figure at 2022 end.
Long-term debt amounted to $15.7 billion, up 27.7% from the figure as of Dec 31, 2022. The current portion of long-term debt totaled $620.6 million at the fourth-quarter end.
Total equity of $23.3 billion rose 3.3% from the 2022-end level.
GPN generated operating cash flows of $2.2 billion in 2023, which inched up 0.2% from the 2022 figure.
Capital Deployment Update
The company bought back shares worth $418.3 million in 2023. Management sanctioned an increase in its share repurchase authorization to $2 billion.
It declared a quarterly dividend of 25 cents per share, which will be paid out on Mar 29, 2024, to its shareholders of record as of Mar 15.
2024 Outlook Unveiled
Adjusted net revenues are anticipated to lie within $9.17-$9.30 billion, which indicates an improvement of 6-7% from the 2023 figure of $8.7 billion.
Adjusted net revenue growth in the Merchant Solutions segment is estimated to witness year-over-year growth of more than 9% in 2024 from the 2023 figure of $6.5 billion. The Issuer Solutions segment’s adjusted net revenues are forecasted to grow between 5% and 6% from the 2023 figure of $2 billion.
Adjusted EPS is anticipated to lie between $11.54 and $11.70 in 2024, which suggests 11-12% growth from the 2023 figure of $10.42. GPN expects to convert almost 100% of adjusted net income into adjusted free cash flow.
The annual adjusted operating margin is expected to increase up to 50 bps in 2024. The metric in both the segments is projected to witness an increase of up to 30 bps and 50 bps, respectively.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Global Payments has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Global Payments has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Global Payments belongs to the Zacks Financial Transaction Services industry. Another stock from the same industry, Fiserv (FI - Free Report) , has gained 1.3% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Fiserv reported revenues of $4.64 billion in the last reported quarter, representing a year-over-year change of +6.4%. EPS of $2.19 for the same period compares with $1.91 a year ago.
Fiserv is expected to post earnings of $1.77 per share for the current quarter, representing a year-over-year change of +12%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Fiserv. Also, the stock has a VGM Score of C.
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Why Is Global Payments (GPN) Down 4.2% Since Last Earnings Report?
It has been about a month since the last earnings report for Global Payments (GPN - Free Report) . Shares have lost about 4.2% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Global Payments Beats Q4 Earnings on LATAM Operations
Global Payments reported fourth-quarter 2023 adjusted earnings per share (EPS) of $2.65, which beat the Zacks Consensus Estimate of $2.63. The bottom line rose 10% year over year.
Adjusted net revenues improved 8% year over year to $2.19 billion. The top line surpassed the consensus mark of $2.18 billion.
The quarterly results were aided by growth in transaction volumes that led to solid contributions from the Merchant Solutions and Issuer Solutions segments. However, the upside was partly offset by an increase in overall expenses.
Operating Performance
Adjusted operating income of $978.5 million advanced 8.9% year over year in the quarter under review but fell short of our estimate of $984.5 million. Adjusted operating margin improved 30 basis points (bps) year over year to 44.8%.
Total operating expenses of $1.9 billion increased 4.9% year over year in the fourth quarter. The increase was due to higher selling, general and administrative expenses, and net gain on business dispositions. The metric came higher than our estimate of $1.8 billion. Interest and other expenses escalated 39.3% year over year to $169.7 million and outpaced our estimate of $161.6 million.
Segmental Performances
Merchant Solutions: The segment recorded adjusted revenues of $1.7 billion in the fourth quarter, which rose 18.5% year over year. The figure almost touched the Zacks Consensus Estimate. The year-over-year growth resulted from a 20% increase in new integrated partners, point-of-sale growth of 20% and double-digit organic growth across the LATAM region.
The unit’s adjusted operating income advanced 17% year over year to $797.3 million but missed the consensus mark of $817 million and our estimate of $822.6 million.
Issuer Solutions: Adjusted revenues were $530.6 million in the segment, which grew 5.8% year over year in the quarter under review and beat the Zacks Consensus Estimate of $529 million as well as our estimate of $529.6 million. The unit benefited on the back of core issuer growth, a rise in traditional accounts on file and an expanding MineralTree mid-market channel.
Adjusted operating income improved 3.8% year over year to $251 million, higher than the consensus mark of $249 million and our estimate of $242.7 million.
Financial Position (as of Dec 31, 2023)
Global Payments exited the fourth quarter with cash and cash equivalents of $2.1 billion, which grew 4.6% from the 2022-end level.
Total assets of $50.6 billion climbed 12.9% from the figure at 2022 end.
Long-term debt amounted to $15.7 billion, up 27.7% from the figure as of Dec 31, 2022. The current portion of long-term debt totaled $620.6 million at the fourth-quarter end.
Total equity of $23.3 billion rose 3.3% from the 2022-end level.
GPN generated operating cash flows of $2.2 billion in 2023, which inched up 0.2% from the 2022 figure.
Capital Deployment Update
The company bought back shares worth $418.3 million in 2023. Management sanctioned an increase in its share repurchase authorization to $2 billion.
It declared a quarterly dividend of 25 cents per share, which will be paid out on Mar 29, 2024, to its shareholders of record as of Mar 15.
2024 Outlook Unveiled
Adjusted net revenues are anticipated to lie within $9.17-$9.30 billion, which indicates an improvement of 6-7% from the 2023 figure of $8.7 billion.
Adjusted net revenue growth in the Merchant Solutions segment is estimated to witness year-over-year growth of more than 9% in 2024 from the 2023 figure of $6.5 billion. The Issuer Solutions segment’s adjusted net revenues are forecasted to grow between 5% and 6% from the 2023 figure of $2 billion.
Adjusted EPS is anticipated to lie between $11.54 and $11.70 in 2024, which suggests 11-12% growth from the 2023 figure of $10.42. GPN expects to convert almost 100% of adjusted net income into adjusted free cash flow.
The annual adjusted operating margin is expected to increase up to 50 bps in 2024. The metric in both the segments is projected to witness an increase of up to 30 bps and 50 bps, respectively.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Global Payments has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Global Payments has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Global Payments belongs to the Zacks Financial Transaction Services industry. Another stock from the same industry, Fiserv (FI - Free Report) , has gained 1.3% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
Fiserv reported revenues of $4.64 billion in the last reported quarter, representing a year-over-year change of +6.4%. EPS of $2.19 for the same period compares with $1.91 a year ago.
Fiserv is expected to post earnings of $1.77 per share for the current quarter, representing a year-over-year change of +12%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Fiserv. Also, the stock has a VGM Score of C.