It has been about a month since the last earnings report for Total System Services, Inc. . Shares have lost about 1% in that time frame, outperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is TSS due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Total System Q4 Earnings Beat Estimates
Total System Services' fourth-quarter 2017 earnings per share of 82 cents surpassed the Zacks Consensus Estimate by 5.1% and grew 15.5% year over year.
Including $135.9 million of tax benefit from the Tax Cuts and Jobs Act, net income per share came in at $1.31, up 227.4% from the prior year quarter.
Net revenues of $870 million grew 10.8% year over year.
Better-than-expected results were driven by growth strong contribution from all its segments.
The company reported an adjusted EBITDA of $293.3 million, up 10% from the year-ago quarter.
Segment Update
Issuer Solutions
In the fourth quarter, net revenues for this segment increased 8.8% year over year to $413.9 million. Total transaction in this segment was 5.9 billion, up 12.2% year over year.
Operating income of $145.6 million was up 9.9% year over year. Operating margin of 35.2% increased 40 basis points (bps) from the year-ago quarter.
Merchant Solutions
Net revenues increased 11.3% to $282.7 million. Dollar sales volume for this segment grew 13% year over year to $32.4 billion.
Operating income advanced 7.2% to $94.9 million, whereas operating margin declined 130 basis points to 33.6%, from the prior-year quarter.
Net Spend
Net revenues increased 16.1% year over year to $186.4 million in the reported quarter. Gross dollar volume for this segment was $7.6 billion, up 15.2% from the prior-year quarter.
Operating income grew 11.5% to $38.8 million, whereas operating margin decreased 90 basis points to 20.8%, from the year-ago quarter.
Financial Update
Total assets decreased 1.2% year over year to $6.3 billion as of Dec 31, 2017.
Total shareholders’ equity climbed to $2.34 billion on Dec 31, 2017, from $2.1 billion, at the end of 2016.
Long-term debt was $3.93 billion as of Dec 31, 2017, down 7.3% from the prior-year quarter.
Free cash flow totaled $660.5 million for the year ended Dec 31, 2017, up 14.8% from the year-ago quarter..
Share Repurchase Update
During the quarter, the company repurchased 3.45 million shares worth $255 million.
2018 Guidance
The company now expects total revenues on a GAAP basis in the range of $3.85-$3.95 billion. On a non-GAAP basis, net revenues are anticipated to be in the range of $3.65-$3.75 billion, reflecting year-over-year growth of 7-10%.
GAAP EPS will likely be in the $2.85-$2.95 band, down 10-7% from the prior-year quarter. Adjusted EPS, attributable to the company’s common shareholders, is expected to be between $4.10-$4.20, reflecting an increase of about 22-25%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter. While looking back an additional 30 days, we can see even more upward momentum. There have been nine moves higher in the last two months. In the past month, the consensus estimate has shifted by 7.1% due to these changes.
VGM Scores
At this time, TSS has a nice Growth Score of B, though it is lagging a lot on the momentum front with a D. The stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stockhas an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for growth investors based on our style scores.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise that TSS has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Image: Bigstock
Why Is Total System Services (TSS) Down 1% Since its Last Earnings Report?
It has been about a month since the last earnings report for Total System Services, Inc. . Shares have lost about 1% in that time frame, outperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is TSS due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Total System Q4 Earnings Beat Estimates
Total System Services' fourth-quarter 2017 earnings per share of 82 cents surpassed the Zacks Consensus Estimate by 5.1% and grew 15.5% year over year.
Including $135.9 million of tax benefit from the Tax Cuts and Jobs Act, net income per share came in at $1.31, up 227.4% from the prior year quarter.
Net revenues of $870 million grew 10.8% year over year.
Better-than-expected results were driven by growth strong contribution from all its segments.
The company reported an adjusted EBITDA of $293.3 million, up 10% from the year-ago quarter.
Segment Update
Issuer Solutions
In the fourth quarter, net revenues for this segment increased 8.8% year over year to $413.9 million. Total transaction in this segment was 5.9 billion, up 12.2% year over year.
Operating income of $145.6 million was up 9.9% year over year. Operating margin of 35.2% increased 40 basis points (bps) from the year-ago quarter.
Merchant Solutions
Net revenues increased 11.3% to $282.7 million. Dollar sales volume for this segment grew 13% year over year to $32.4 billion.
Operating income advanced 7.2% to $94.9 million, whereas operating margin declined 130 basis points to 33.6%, from the prior-year quarter.
Net Spend
Net revenues increased 16.1% year over year to $186.4 million in the reported quarter. Gross dollar volume for this segment was $7.6 billion, up 15.2% from the prior-year quarter.
Operating income grew 11.5% to $38.8 million, whereas operating margin decreased 90 basis points to 20.8%, from the year-ago quarter.
Financial Update
Total assets decreased 1.2% year over year to $6.3 billion as of Dec 31, 2017.
Total shareholders’ equity climbed to $2.34 billion on Dec 31, 2017, from $2.1 billion, at the end of 2016.
Long-term debt was $3.93 billion as of Dec 31, 2017, down 7.3% from the prior-year quarter.
Free cash flow totaled $660.5 million for the year ended Dec 31, 2017, up 14.8% from the year-ago quarter..
Share Repurchase Update
During the quarter, the company repurchased 3.45 million shares worth $255 million.
2018 Guidance
The company now expects total revenues on a GAAP basis in the range of $3.85-$3.95 billion. On a non-GAAP basis, net revenues are anticipated to be in the range of $3.65-$3.75 billion, reflecting year-over-year growth of 7-10%.
GAAP EPS will likely be in the $2.85-$2.95 band, down 10-7% from the prior-year quarter. Adjusted EPS, attributable to the company’s common shareholders, is expected to be between $4.10-$4.20, reflecting an increase of about 22-25%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter. While looking back an additional 30 days, we can see even more upward momentum. There have been nine moves higher in the last two months. In the past month, the consensus estimate has shifted by 7.1% due to these changes.
Total System Services, Inc. Price and Consensus
Total System Services, Inc. Price and Consensus | Total System Services, Inc. Quote
VGM Scores
At this time, TSS has a nice Growth Score of B, though it is lagging a lot on the momentum front with a D. The stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stockhas an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for growth investors based on our style scores.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise that TSS has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.