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Heartland Payment Upped to Buy - Analyst Blog

Posted: 12/23/2013 6:15:00 PM
Referenced Stocks: ADS;AXP;HPY;QIWI

On Dec 18, Zacks Investment Research upgraded Heartland Payment Systems, Inc . ( HPY ) to a Zacks Rank #2 (Buy).

Why the Upgrade?

Heartland Payment has been witnessing rising earnings estimates on the back of strong third-quarter 2013 results and strategic initiatives to ramp up its growth profile. Moreover, this financial transaction service provider delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 12.4%. The long-term expected earnings growth rate for this stock is 14.7%.    

Heartland Payment reported third-quarter non-GAAP earnings per share of 62 cents, surpassing the Zacks Consensus Estimate by 11% and year ago earnings by 26%.

Earnings were primarily aided by a solid top line, improving 9.5% year-over-year. The improvement was largely fuelled by solid growth in card processing, surge in Payroll, solid contribution from Campus Solutions and a substantial improvement in Micropayments.

Small and mid-sized enterprise (SME) quarterly transaction processing volume was $19.6 billion, up 3.9% year over year in the reported quarter.

Heartland Payment spent $6 million to buy back 0.2 million shares in the third quarter.

Moreover, Heartland Payment expects 2013 net earnings of $2.30 and $2.33 per share on revenues of $600 million and $605 million, respectively.

Heartland Payment also inked a deal with the merchant financing operations of American Express Company ( AXP ) - American Express Merchant Financing. This deal will make Heartland the first processor to distribute American Express Merchant Financing.

The Zacks Consensus Estimate for 2013 moved north by 7.1% to $2.10 per share, as 3 of 6 estimates were revised higher over the last 60 days. The current estimate is below the guidance range provided by Heartland Payment. For 2014 also, 3 of the 6 estimates were revised higher over the same time frame, lifting the Zacks Consensus Estimate by 2.7% to $2.30 per share.

Other Stocks to Consider

Other financial transaction service providers which look attractive at current levels include Qiwi plc ( QIWI ) and Alliance Data Systems Corp. ( ADS ). While Qiwi sports a Zack Rank #1 (Strong Buy), Alliance Data carries the same Zacks Rank as Heartland Payment.

ALLIANCE DATA (ADS): Free Stock Analysis Report

AMER EXPRESS CO (AXP): Free Stock Analysis Report

HEARTLAND PAYMT (HPY): Free Stock Analysis Report

QIWI PLC-ADR (QIWI): Free Stock Analysis Report

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Zacks Investment Research