Yahoo Finance Global Payments (GPN) Down 9% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Global Payments (GPN). Shares have lost about 9% 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 drivers.
Global Payments Beats on Q1 Earnings, Reaffirms 2024 View
Global Payments reported first-quarter 2024 adjusted earnings per share (EPS) of $2.59, which beat the Zacks Consensus Estimate of $2.57. The bottom line rose 21.6% year over year.
Adjusted net revenues improved 6.6% year over year to $2.18 billion. The top line surpassed the consensus mark of $2.17 billion.
The quarterly results were aided by growth in transaction volumes and core issuer growth in the Issuer Solutions segment. A decline in expenses also favored the first-quarter results. However, the declining Merchant Solutions’ operating margin might have acted as a partial offset.
Operating Performance
Adjusted operating income of $949.6 million advanced 7.6% year over year in the quarter under review and beat our estimate of $934.8 million. Adjusted operating margin improved 40 basis points (bps) year over year to 43.5%.
Total operating expenses of $2 billion decreased 12% year over year in the first quarter. The decrease was due to lower cost of services, and losses incurred on business dispositions in the year-ago period. The metric lagged our estimate by 1.4%. Interest and other expenses escalated 31.9% year over year to $162.1 million and outpaced our estimate of $151.9 million.
Segmental Performances
Merchant Solutions: The segment recorded adjusted revenues of $1.68 billion in the first quarter, which rose 15.6% year over year. The figure surpassed our estimate of $1.67 billion. The year-over-year growth resulted from a 30% increase in U.S. merchant partners, point-of-sale growth of 20% and volume growth of 16%.
The unit’s adjusted operating income advanced 14.8% year over year to $790.4 million and beat our estimate of $782.7 million.
Issuer Solutions: Adjusted revenues were $515.6 million in the segment, which grew 5.2% year over year in the quarter under review but missed the Zacks Consensus Estimate by a whisker. The unit benefited on the back of core issuer growth, a rise in traditional accounts on file and rising transactions.
Adjusted operating income improved 12.2% year over year to $241.4 million, higher than the consensus mark of $229 million and our estimate of $225.6 million.
Financial Position (as of Mar 31, 2024)
Global Payments exited the first quarter with cash and cash equivalents of $2.2 billion, which grew from $2.1 billion at 2023-end.
Total assets of $51.8 billion climbed from $50.6 billion at 2023-end.
Long-term debt amounted to $15.6 billion, down from $15.7 billion at 2023-end. The current portion of long-term debt totaled $1.6 billion at the first-quarter end.
Total equity of $22.8 billion declined from $23.3 billion at 2023-end.
Global Payments generated operating cash flows of $416.3 million in the first quarter of 2024, which declined 30.6% year over year.
Capital Deployment Update
The company bought back shares worth $800 million in the first quarter of 2024.
It declared a quarterly dividend of 25 cents per share, which will be paid out on Jun 28, 2024, to its shareholders of record as of Jun 14.
Joint Venture Update
The company received EU regulatory approval for the previously disclosed joint venture with Commerzbank.
2024 Outlook Reiterated
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 be between 5% and 6% from the 2023 figure of $2 billion.
Adjusted EPS is anticipated to be between $11.54 and $11.70 in 2024, which suggests 11-12% growth from the 2023 figure of $10.42. Global Payments 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 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 review have trended downward during the past month.
VGM Scores
At this time, Global Payments has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.
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 #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Global Payments is part of the Zacks Financial Transaction Services industry. Over the past month, Visa (V), a stock from the same industry, has gained 1.4%. The company reported its results for the quarter ended March 2024 more than a month ago.
Visa reported revenues of $8.78 billion in the last reported quarter, representing a year-over-year change of +9.9%. EPS of $2.51 for the same period compares with $2.09 a year ago.
For the current quarter, Visa is expected to post earnings of $2.41 per share, indicating a change of +11.6% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.2% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Visa. Also, the stock has a VGM Score of D.
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