Expanding its merchant services,
Total System Services Inc.
) announced the extension of a long-term strategic alliance with
CardWorks Inc.'s wing, Merrick Bank, the company's client for
over 7 years now.
The extension of the business pact reflects the market's
confidence in Total System. The company will continue to serve
Merrick Bank by providing easy and usable solutions to the
latter's independent sales organization partners. Total System's
service portfolio also includes point-of-sale solutions,
authorization, settlement, reporting, managed services and risk
Of late, Total System has been investing to become a one-stop
platform for all kinds of merchant and issuer solutions through
its advanced services and technology upgrades. Alongside, the
company has been strengthening its clientele base by offering
customized and flexible processing solutions to all its partners.
Such offerings also helped Total System gain a multi-year
contract with St. Mary's Bank last week. St. Mary's Bank is the
first credit union in the US and will now gain leverage on its
consumer credit card portfolio from the Total System's payments
Total System has been witnessing improvement in its financials
over the past few quarters based on its steady fundamental growth
initiatives. We believe that its risk-free balance sheet, modest
cash position and cash flow generating capability provide viable
scope for efficient capital deployment. However, risks related to
operating leverage and competitive pressure fromarch-rivals such
Heartland Payment Systems Inc.
) remain eminent.
Based on the pros and cons, the Zacks Consensus Estimate
currently pegs earnings at 33 cents for the fourth quarter of
2012, up about 6% over the prior-year quarter. For 2012, earnings
are projected to increase to $1.29 per share. This reflects an
increase of about 12.5% year over year, which is slightly higher
than the upper end of management's guidance of 10-12% growth for
2012. Based on its influential contracts, management also expects
to achieve the higher-end of its guidance in all growth
Currently, we maintain a long-term Neutral stance on Total
System with a Zacks #3 Rank, which implies a short-term Hold
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