Global Payments (GPN) Down 22.5% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Global Payments (GPN). Shares have lost about 22.5% in that time frame, outperforming 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 Q4 Earnings Beat Estimates, Rise Y/Y

Global Payments came up with fourth-quarter 2019 adjusted earnings of $1.62 per share, beating the Zacks Consensus Estimate by 7.3% and improving 21.8% year over year.

The quarterly results reflect higher revenues driven by the acquisition of

Total System in the second quarter, partly offset by increase in expenses.

Behind the Headlines

The company’s adjusted revenues of $1.8 billion were up 120% year over year.

Total operating expenses of $1.79 billion increased 151% year over year, led by higher cost of services as well as selling, general and administration expenses.

Growth Across Segments

Merchant Solutions: Adjusted revenues of $1.16 billion increased 42.7% year over year. Operating income of $522.5 million was up 46.9% year over year.

Issuer Solutions: Adjusted net revenues plus network fees of $459 million grew from $5.3 million in the year-ago quarter. Operating income was $184.7 million compared with $3.4 million in the year-ago quarter.

Business and Consumer Solution: This segment was formed after the acquisition of Total System. It reported adjusted net revenues plus network fees of $199.5 million. Operating income was $42.8 million.

Balance Sheet Position

Total cash and cash equivalents as of Dec 31, 2019 were $1.68 billion, up 38.8% year over year.

Long-term debt as of Dec 31, 2019 was $9.1 billion, up 82% from year-end 2018 level.

Net cash provided by operating activities for 2019 was $1.39 billion, up 25.2% year over year.

Dividend Announcement

The company approved a dividend of 19.5 cents per share payable Mar 27, 2020 to shareholders of record as of Mar 13, 2020.

2020 Outlook

For 2020, the company expects adjusted net revenues of $7.68 billion to $7.75 billion, indicating growth of 67-69% or 8-9% on a combined basis. Annual adjusted operating margin for the year is expected to expand by up to 250 basis points on a combined basis and 75 basis points on a reported basis. The company expects adjusted earnings per share growth of 20-23% over 2019 to $7.43 to $7.62.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, 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 F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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.