We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Can Global Payments (GPN) Q2 Earnings Navigate Rising Costs?
Read MoreHide Full Article
Global Payments Inc. (GPN - Free Report) is set to report its second-quarter 2024 results on Aug 7, before the opening bell.
The Zacks Consensus Estimate for second-quarter earnings is currently pegged at $2.91 per share, implying an increase of 11.1% from the year-ago reported number. The estimate remained stable over the past week. The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $9.2 billion, suggesting 6.4% growth from the year-ago actuals.
Image Source: Zacks Investment Research
GPN beat the consensus estimate for earnings in each of the trailing four quarters, with the average surprise being 1.1%, as you can see below.
However, 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 has an Earnings ESP of -0.98%. This is because the Most Accurate Estimate currently stands at $2.88 per share, lower than the Zacks Consensus Estimate of $2.91.
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).
Now, let’s see how things have shaped up before the second-quarter earnings announcement.
Q2 Factors to Note
In the second quarter, results from GPN’s Merchant Solutions — its biggest operating segment — are likely to have increased from growing transaction volumes, new integrated partners and point of sale. The Zacks Consensus Estimate for adjusted revenues from Merchant Solutions indicates a 6.9% increase from the year-ago period’s reported number, whereas our model estimates a 6.5% increase.
An increase in U.S. merchant partners is likely to have aided the Merchant Solutions segment. The consensus mark for adjusted operating income indicates 6.8% growth from a year ago, while our model estimate suggests a 6.5% increase.
Both the consensus estimate and our model estimate for Issuer Solutions’ adjusted revenues signal a nearly 6% increase from the year-ago figure. Core issuer growth and its expanding traditional accounts are likely to have aided the segment in the quarter under review. The consensus estimate for adjusted operating income from the unit indicates a rise of nearly 6% in the second quarter, whereas our model estimate suggests almost 7% growth.
The Zacks Consensus Estimates for revenues from Americas and Europe operations indicate 3.2% and 4.4% year-over-year increases, respectively, in the second quarter.
The above-mentioned factors are expected to have positioned GPN for significant year-over-year growth. However, profits from the businesses are likely to have been partially offset by increased costs under certain heads in the second quarter. Our model expects adjusted selling, general and administrative expenses to have increased more than 6% year over year.
For the upcoming quarter, we anticipate the adjusted cost of service to be around $523 million. Continuous investments to upgrade digital capabilities are anticipated to have increased expenditures. Adjusted total operating expenses are expected to have climbed 4.4% year over year in the second quarter, making an earnings beat uncertain.
Price Performance
Global Payments' stock has lost 22.7% in the year-to-date period against the industry’s growth of 4.5% and the S&P 500 Index’s 14.5% gain. In comparison, its peer Mastercard Incorporated (MA - Free Report) increased 8.4%, Fidelity National Information Services, Inc. (FIS - Free Report) jumped 25%, whileThe Western Union Company (WU - Free Report) lost 2.1% during the same period.
YTD Price Performance
Image Source: Zacks Investment Research
What Should Investors Do Now?
Rising competition due to emerging payment firms rapidly securing market share can affect Global Payments’ pricing dynamics and squeeze margins. Also, despite implementing multiple cost control measures, the company's operating expenses are on the rise. The decline in share price this year indicates investors’ waning confidence in the stock as consumer spending growth is expected to suffer in the coming days with declining savings and weak disposable income growth. Given these headwinds, GPN appears to be a risky investment in the short run. Exiting the stock may be a prudent decision for investors looking to mitigate potential risks.
Image: Bigstock
Can Global Payments (GPN) Q2 Earnings Navigate Rising Costs?
Global Payments Inc. (GPN - Free Report) is set to report its second-quarter 2024 results on Aug 7, before the opening bell.
The Zacks Consensus Estimate for second-quarter earnings is currently pegged at $2.91 per share, implying an increase of 11.1% from the year-ago reported number. The estimate remained stable over the past week. The Zacks Consensus Estimate for second-quarter revenues is currently pegged at $9.2 billion, suggesting 6.4% growth from the year-ago actuals.
GPN beat the consensus estimate for earnings in each of the trailing four quarters, with the average surprise being 1.1%, as you can see below.
Global Payments Inc. Price and EPS Surprise
Global Payments Inc. price-eps-surprise | Global Payments Inc. Quote
Q2 Earnings Whispers
However, 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 has an Earnings ESP of -0.98%. This is because the Most Accurate Estimate currently stands at $2.88 per share, lower than the Zacks Consensus Estimate of $2.91.
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).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Now, let’s see how things have shaped up before the second-quarter earnings announcement.
Q2 Factors to Note
In the second quarter, results from GPN’s Merchant Solutions — its biggest operating segment — are likely to have increased from growing transaction volumes, new integrated partners and point of sale. The Zacks Consensus Estimate for adjusted revenues from Merchant Solutions indicates a 6.9% increase from the year-ago period’s reported number, whereas our model estimates a 6.5% increase.
An increase in U.S. merchant partners is likely to have aided the Merchant Solutions segment. The consensus mark for adjusted operating income indicates 6.8% growth from a year ago, while our model estimate suggests a 6.5% increase.
Both the consensus estimate and our model estimate for Issuer Solutions’ adjusted revenues signal a nearly 6% increase from the year-ago figure. Core issuer growth and its expanding traditional accounts are likely to have aided the segment in the quarter under review. The consensus estimate for adjusted operating income from the unit indicates a rise of nearly 6% in the second quarter, whereas our model estimate suggests almost 7% growth.
The Zacks Consensus Estimates for revenues from Americas and Europe operations indicate 3.2% and 4.4% year-over-year increases, respectively, in the second quarter.
The above-mentioned factors are expected to have positioned GPN for significant year-over-year growth. However, profits from the businesses are likely to have been partially offset by increased costs under certain heads in the second quarter. Our model expects adjusted selling, general and administrative expenses to have increased more than 6% year over year.
For the upcoming quarter, we anticipate the adjusted cost of service to be around $523 million. Continuous investments to upgrade digital capabilities are anticipated to have increased expenditures. Adjusted total operating expenses are expected to have climbed 4.4% year over year in the second quarter, making an earnings beat uncertain.
Price Performance
Global Payments' stock has lost 22.7% in the year-to-date period against the industry’s growth of 4.5% and the S&P 500 Index’s 14.5% gain. In comparison, its peer Mastercard Incorporated (MA - Free Report) increased 8.4%, Fidelity National Information Services, Inc. (FIS - Free Report) jumped 25%, whileThe Western Union Company (WU - Free Report) lost 2.1% during the same period.
YTD Price Performance
Image Source: Zacks Investment Research
What Should Investors Do Now?
Rising competition due to emerging payment firms rapidly securing market share can affect Global Payments’ pricing dynamics and squeeze margins. Also, despite implementing multiple cost control measures, the company's operating expenses are on the rise. The decline in share price this year indicates investors’ waning confidence in the stock as consumer spending growth is expected to suffer in the coming days with declining savings and weak disposable income growth. Given these headwinds, GPN appears to be a risky investment in the short run. Exiting the stock may be a prudent decision for investors looking to mitigate potential risks.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.