On Sep 14, 2013, Zacks Investment Research upgraded electronic
payment service provider -
Total System Services Inc.
) -- to a Zacks Rank #1 (Strong Buy) from Zacks Rank #2
Why the Upgrade?
Total System has been experiencing rising earnings estimates
on the back of improved second-quarter 2013 results. Moreover,
growth in transaction volumes and new accounts as well as
diversification through NetSpend acquisition have been
Additionally, this electronic payment processing and merchant
acquiring services provider outperformed the year-to-date S&P
500 index, which posed a 20.4% increase against the company's
return of 37.1%. Total System is expected to grow by about 11.8%
in the long run, which appears sustainable.
On Jul 23, Total System reported second-quarter 2013 operating
earnings per share of 34 cents, which beat the Zacks Consensus
Estimate by a penny but also fell short of the year-ago number by
Total System is witnessing healthy growth from its merchant
acquiring business owing to technological upgrades and the
attainment of spectacular processing contracts. This is reflected
by higher number of accounts on file, along with the recent
strategic alliances with ProPay and PayPal.
Moreover, the acquisition of NetSpend in Jul 2013 is expected
to amplify the company's core synergies and operating leverage,
while also diversify Total System's product portfolio into
prepaid card services. The accretion from the acquisition is also
reflected by the raised guidance.
Accordingly, management upped its top-line growth projections
within mid-to-high teens range in 2013 from prior 5−7% growth
estimate. Excluding acquisition-related expenses, earnings and
EBITDA are also predicted to grow in high-teens range, up from
prior single-digit estimates. Management also expects to reduce
its debt, borrowed to fund the acquisition, as soon as possible
and sustain a debt-to-EBITDA of 2.0x in future, along with
consistent capital deployment.
Based on Total System's fundamental strength and bright
outlook, the Zacks Consensus Estimate for 2013 grew 11.0% to
$1.61 per share in the last 60 days. The same for 2014 rose 9.6%
to $1.94 per share in the last 60 days. Meanwhile, no downward
revision in estimates was witnessed for both the years.
Other Stocks to Consider
Apart from Total System, other outperformers in the financial
services industry include
Glacier Bancorp Inc.
East West Bancorp
). All the stocks carry a Zacks Rank #1 (Strong Buy).
EAST WEST BC (EWBC): Free Stock Analysis
GLACIER BANCORP (GBCI): Free Stock Analysis
PREFERRED BANK (PFBC): Free Stock Analysis
TOTAL SYS SVC (TSS): Free Stock Analysis
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