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Global Payments Reaches 52-Week High - Analyst Blog

By: Zacks.com
Posted: 1/10/2014 9:10:00 AM
Referenced Stocks: ADS;AXP;FISV;GPN

Riding on a steady growth momentum, shares of Global Payments Inc. ( GPN ) hit a new 52-week high of $68.45 on Jan 9. This financial transaction service provider's shares have escalated 45.5% since the beginning of 2013.

Moreover, shares of Global Payments increased about 4.1% as the company reported its second-quarter of fiscal 2014 results after the closing bell on Jan 8, with a positive earnings surprise of 4.9%. The encouraging momentum of this Zacks Rank #2 (Buy) stock is fuelled by improved core growth coupled with a strong operating leverage.

Yesterday's closing price represents a robust one-year return of about 42% against a return of 25.3% clocked by the S&P 500 index. Average volume of shares traded over the last three months stands at approximately 748.8K.

Earnings Review

On Jan 8, Global Payments reported second-quarter (ended Nov 2013) operating earnings per share of $1.07, which noticeably exceeded the Zacks Consensus Estimate of $1.02 and the year-ago quarter number of 93 cents.

Results reflected year-over-year top-line growth of 7.7% driven by improved merchant service revenues across North America and international regions. However, growth was partially offset by 8.3% rise in core operating expenses, although operating income rose 5.5%. Consequently, operating cash flow surged about 230% over the prior-year period to $411.7 million.

Overall, Global Payments is focusing on strengthening its roots globally through strategic alliances, technology upgrades and a dynamic business mix. Although high debt levels raise balance sheet risks, increased cash position and improving operating cash flow bode well for future business prospects of the company.

The raised earnings outlook for fiscal 2014, which estimates 10-12% growth over fiscal 2013 along with consistent return of excess capital further boosts investors' confidence in the stock.

Valuation

Further, valuation looks reasonable for Global Payments. Both on forward price-to-earnings and price-to-book basis, the shares are trading at a discount of about 16% and 17%, respectively, to the peer group average. However, return on equity of 23.4% and return on assets of 9.1% stood modestly higher than the peer group average. Estimated long-term earnings growth is pegged at 10.7%, which is lower than the peer group average of 13.5%.

Some better-ranked financial stocks that warrant a look are American Express Co. ( AXP ), Fiserv Inc. ( FISV ) and Alliance Data Systems Corp. ( ADS ). All these stocks carry the same Zacks Rank as Global Payments.



ALLIANCE DATA (ADS): Free Stock Analysis Report

AMER EXPRESS CO (AXP): Free Stock Analysis Report

FISERV INC (FISV): Free Stock Analysis Report

GLOBAL PAYMENTS (GPN): Free Stock Analysis Report

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