Global Payments Inc. GPN benefits on the back of solid segmental contribution, higher transaction volumes, acquisitions and collaborations coupled with a strong financial position.

Zacks Rank & Price Rally

Global Payments currently carries a Zacks Rank #3 (Hold).

The stock has gained 36.7% in the past year compared with the industry’s 29.5% growth. The Zacks Business Services sector and S&P 500 Composite gained 31.2% and 32.1%, respectively, in the said time frame.

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Rising Estimates

The Zacks Consensus Estimate for GPN’s 2024 earnings is pegged at $11.62 per share, suggesting 11.5% growth from the 2023 figure. The consensus mark for revenues is $9.2 billion, which indicates a rise of 6.5% from the 2023 figure.

The bottom line of Global Payments outpaced estimates in each of the trailing four quarters, the average surprise being 2%.

Key Drivers

Strong contributions from the Merchant Solutions and Issuer Solutions segments continue to drive revenue growth of Global Payments. Revenues in both segments improved 15.3% and 6.8%, respectively, on a year-over-year basis in 2023.

Merchant Solutions’ performance benefits on the back of higher transaction volumes, while the Issuer Solutions unit earns payment processing services revenues derived from GPN’s long-term processing contracts with financial institutions and other financial services providers.

Global Payments resorts to acquisitions, partnerships and joint ventures for enhancing capabilities, boosting business scale, expanding share across existing markets as well as stepping into new markets. The acquisition of the global payment technology integrations and acquiring solutions provider, EVO Payments, contributed to the 7.6% year-over-year overall revenue growth of Global Payments in 2023. GPN recently formed a joint venture with Commerzbank to benefit the nationwide small-sized and medium-sized business clients of the bank with enhanced digital payment services. Buyouts remain one of management’s priorities to allocate capital.

The payments technology company continues to make several technology investments related to new product development and innovation, as well as the transition of specific underlying technology platforms to cloud environments. These initiatives are meant to upgrade the performance of the operating platforms, diversify its technology and cloud-based solutions suite, and drive cost efficiencies. Meanwhile, Global Payments will continue to benefit from the expense synergies stemming from the EVO acquisition. It expects to achieve $135 million in annual run rate expense synergies within the next two years.  To intensify focus on serving its core corporate customers, GPN resorts to divesting businesses and selling the consumer part of Netspend business was one such act.

Global Payments holds an impressive financial stand, substantiated by a strong cash balance and robust cash-generating abilities. It generated operating cash flows of $2.2 billion in 2023, which improved 0.2% from the prior-year figure. The financial strength imparts GPN the power to pursue business investments and come up with enhanced technologies that position it ahead of industry peers.  Management also returns capital to shareholders via share repurchases and regular dividend payments.

Stocks to Consider

Some better-ranked stocks in the broader Business Services space are MoneyLion Inc. ML, Flywire Corporation FLYW and Cantaloupe, Inc. CTLP, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for MoneyLion’s current-year bottom line indicates a 98.7% year-over-year improvement. The consensus estimate for ML’s current-year top line is pegged at $518.9 million, suggesting 22.6% year-over-year growth.

The Zacks Consensus Estimate for Flywire’s current-year earnings is pegged at 4 cents per share, which indicates a 157.1% year-over-year improvement. FLYW beat earnings estimates in two of the past four quarters, met once and missed on the other occasion, with an average surprise of 33.1%. The consensus estimate for current-year revenues suggests 30.1% year-over-year growth.

The Zacks Consensus Estimate for Cantaloupe’s current-year earnings is pegged at 17 cents per share, which indicates significant growth from breakeven earnings in the year-ago period. CTLP beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 61.7%. The consensus mark for current-year revenues predicts a 13.2% year-over-year gain.

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