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Is a Beat in Store for Total System (TSS) in Q3 Earnings?
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Total System Services, Inc.’s third-quarter earnings scheduled for Oct 23, 2018, should reflect revenue and earnings growth.
Total System’s Issuer Solutions segment should see top-line growth from an increase in Total Accounts on File (AoF), led by new business and internal growth. The Zacks Consensus Estimate for total AoF is 844 million, reflecting an increase of 5.9% year over year. Focus on new product initiatives, new contract agreements, extension and renewal of old ones, technology modernization and integration activities will further aid revenues in the segment.
The company’s NetSpend segment, which has been renamed to Consume Solution should deliver revenue growth from an increase in gross dollar volume and higher debit active cards. Contract extensions for several significant partnership agreements signed recently should drive the top line. The Zacks Consensus Estimate for total revenues from the segment is $191 million, up 6.1% year over year.
In the company’s Merchant Solutions segment, continued shifting of business mix toward integrated payments has been a noticeable impact on the segment financials, helping drive double-digit revenue growth. The acquisition of Cayan completed earlier during the year should be accretive to the segment’s earnings. The Zacks Consensus Estimate for total revenues from the segment is $353 million, up 25.2% year over year.
Total System should incur higher interest cost in the third quarter on account of debt taken to close the Cayan acquisition. The interest cost, however, should moderate as the company paid $180 million of debt in the first half of 2018 and must have continued to do the same in the third quarter.
Investments made to enhance the company’s infrastructure, longer-term product offerings and technological capabilities, should shoot up expenses and weigh on margins to some extent.
Nevertheless, a decline in tax rate to 21% to 23% range, down from the 32% to 33%, as a result of the Tax Cuts and Jobs Act will aid the company’s margins.
Earnings Surprise History
The company boasts an attractive earnings surprise history. It beat estimates in each of the last four reported quarters, with an average positive surprise of 7.7%. This is depicted in the chart below:
Our proven model does not conclusively show that Total System is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1, 2 or 3 for this to happen. But that is not the case here as you will see below.
Earnings ESP: Total System has an Earning ESP of -2.28%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter
Zacks Rank: Total System carries a Zacks Rank #3 (Hold). We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies that you may also consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Discover Financial Services (DFS - Free Report) has an Earnings ESP of +0.54% and a Zacks Rank #2 (Hold). The company is expected to report third-quarter earnings results on Oct 25.
Synchrony Financial (SYF - Free Report) has an Earnings ESP of +1.04% and a Zacks Rank #2. The company is expected to report third-quarter earnings results on Oct 19.
Visa Inc. (V - Free Report) has an Earnings ESP of +1.14% and a Zacks Rank #3. The company is expected to report fiscal fourth-quarter earnings results on Oct 24.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
Is a Beat in Store for Total System (TSS) in Q3 Earnings?
Total System Services, Inc.’s third-quarter earnings scheduled for Oct 23, 2018, should reflect revenue and earnings growth.
Total System’s Issuer Solutions segment should see top-line growth from an increase in Total Accounts on File (AoF), led by new business and internal growth. The Zacks Consensus Estimate for total AoF is 844 million, reflecting an increase of 5.9% year over year. Focus on new product initiatives, new contract agreements, extension and renewal of old ones, technology modernization and integration activities will further aid revenues in the segment.
The company’s NetSpend segment, which has been renamed to Consume Solution should deliver revenue growth from an increase in gross dollar volume and higher debit active cards. Contract extensions for several significant partnership agreements signed recently should drive the top line. The Zacks Consensus Estimate for total revenues from the segment is $191 million, up 6.1% year over year.
In the company’s Merchant Solutions segment, continued shifting of business mix toward integrated payments has been a noticeable impact on the segment financials, helping drive double-digit revenue growth. The acquisition of Cayan completed earlier during the year should be accretive to the segment’s earnings. The Zacks Consensus Estimate for total revenues from the segment is $353 million, up 25.2% year over year.
Total System should incur higher interest cost in the third quarter on account of debt taken to close the Cayan acquisition. The interest cost, however, should moderate as the company paid $180 million of debt in the first half of 2018 and must have continued to do the same in the third quarter.
Investments made to enhance the company’s infrastructure, longer-term product offerings and technological capabilities, should shoot up expenses and weigh on margins to some extent.
Nevertheless, a decline in tax rate to 21% to 23% range, down from the 32% to 33%, as a result of the Tax Cuts and Jobs Act will aid the company’s margins.
Earnings Surprise History
The company boasts an attractive earnings surprise history. It beat estimates in each of the last four reported quarters, with an average positive surprise of 7.7%. This is depicted in the chart below:
Total System Services, Inc. Price and Consensus
Total System Services, Inc. Price and Consensus | Total System Services, Inc. Quote
Here is what our quantitative model predicts
Our proven model does not conclusively show that Total System is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1, 2 or 3 for this to happen. But that is not the case here as you will see below.
Earnings ESP: Total System has an Earning ESP of -2.28%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter
Zacks Rank: Total System carries a Zacks Rank #3 (Hold). We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies that you may also consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Discover Financial Services (DFS - Free Report) has an Earnings ESP of +0.54% and a Zacks Rank #2 (Hold). The company is expected to report third-quarter earnings results on Oct 25.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Synchrony Financial (SYF - Free Report) has an Earnings ESP of +1.04% and a Zacks Rank #2. The company is expected to report third-quarter earnings results on Oct 19.
Visa Inc. (V - Free Report) has an Earnings ESP of +1.14% and a Zacks Rank #3. The company is expected to report fiscal fourth-quarter earnings results on Oct 24.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>