On Wednesday, Citi made adjustments to its outlook on Global Payments (NYSE:GPN), reducing the price target to $142 from the previous $145 while sustaining a Buy rating on the stock. The financial services company recently held an analyst day where it presented several key updates, including its strategy and organizational changes, improved transparency, and the potential in point-of-sale software. The company also provided a realistic three-year outlook.
Global Payments was commended for its acknowledgment of its strengths and challenges. However, the preliminary outlook for 2025, which suggests an organic growth rate of approximately 5 to 6.2%, did not meet some expectations and contributed to a decline in the stock's value. Despite this, Citi views the 2025 revenue and earnings per share (EPS) projections as a more likely baseline that takes into account the potential impacts of organizational changes.
Citi's analysis indicates that there could be a divestiture opportunity for Global Payments towards the end of 2024 or the beginning of 2025. For the company to enhance its appeal to investors as a long-term holding, it will need to demonstrate progress over the next few quarters. The firm appreciates the company's focus on capital allocation discipline and the improved transparency, which could draw investor interest.
The analyst from Citi concluded that Global Payments remains an attractive investment option. The valuation of the company at approximately 8 times its projected 2025 earnings per share and a mid-teens enterprise value to free cash flow (EV/FCF) ratio is appealing, especially when compared to the potential for double-digit EPS growth.
In other recent news, Global Payments Inc. saw a 6% increase in adjusted net revenue for the second quarter, reaching $2.32 billion. The Merchant Solutions segment noted an 8% rise to $1.8 billion, while the Issuer Solutions segment experienced a 4% increase to $527 million.
KeyBanc maintained an Overweight rating on the company, driven by its favorable exposure to spending and tech-enabled mix in the Merchant segment. Similarly, Baird reiterated an Outperform rating, expressing confidence in the company's potential for 10-15% earnings per share growth in the coming years.
Citi also maintained a Buy rating, suggesting that the upcoming investor day could provide clarity on the company's growth potential. Susquehanna affirmed a Positive rating, highlighting the benefits from the integration of EVO. TD Cowen maintained a Buy rating, emphasizing the upcoming Investor Day as a pivotal moment.
InvestingPro Insights
Global Payments (NYSE:GPN) has shown resilience and potential in its financial standing, according to recent data from InvestingPro. The company's market capitalization stands at a robust $26.42 billion, and it boasts a price-to-earnings (P/E) ratio of 19.04, which is considered low relative to its near-term earnings growth. This is further supported by an adjusted P/E ratio for the last twelve months as of Q2 2024, which is even more attractive at 15.73.
InvestingPro Tips highlight that Global Payments is anticipated to see net income growth this year, a prediction that aligns with the company's own three-year outlook. Additionally, with a consistent track record of maintaining dividend payments for 24 consecutive years and a dividend yield of 0.96%, the company demonstrates a commitment to returning value to shareholders. Analysts also predict profitability for the current year, a sentiment that is underscored by the company's performance over the last twelve months.
For investors seeking further insights, InvestingPro offers additional tips on Global Payments, available at https://www.investing.com/pro/GPN. These tips can provide a deeper understanding of the company's financial health and future prospects.
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