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Total System (TSS): What's in Store this Earnings Season?

Total System Services, Inc.TSS is scheduled to report third-quarter 2015 results on Oct 27.

In the last quarter, the company delivered a 3.9% positive earnings surprise. The average beat for the trailing four quarters is 10.7%.

Will Total System deliver a positive earnings surprise this quarter as well? Let's see what factors might have influenced the earnings report this time around.

Q3 Flashback

Total System's earnings during the quarter will likely be affected by stressed revenues at its merchant segment, which will face year-over-year comparison pressure.

In its subsidiary, NetSpend, the company expects the margin to contract from the 2014 levels largely due to investments being made to support new relationships, launch of new products and features and other investments.

Increased expenses, significant exposure to interest rate risks associated with the investment of available cash and foreign exchange risks raise caution. Additionally, an increased debt burden and a high backlog of accounts can affect earnings.

We, however, expect higher electronic payment processing services revenues which are generated from charges based on several factors. One of these factors - the number of accounts on file - has been increasing over the last few years and the third quarter of 2015 was no exception.

Earnings Whispers

Our proven model does not conclusively show that Total System is likely to beat the Zacks Consensus Estimate in the third quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as elaborated below.

Zacks ESP: Total System's Most Accurate estimate is pegged at 57 cents per share, which is in line with the Zacks Consensus Estimate. The Earnings ESP is thus 0.00%.

Zacks Rank: Total System has a Zacks Rank #4 (Sell). As it is Total System does not have a positive Earnings ESP, on top of that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into an earnings announcement, especially when it is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Fiserv, Inc. FISV has an Earnings ESP of +3.09% and a Zacks Rank #2. It will release third-quarter earnings on Oct 27, 2015.

Visa Inc. V has an Earnings ESP of +16.13% and a Zacks Rank #3. It will release third-quarter earnings on Nov 2, 2015.

The Allstate Corporation ALL has an Earnings ESP of +1.5% and a Zacks Rank #3. The company will report third-quarter earnings on Nov 2, 2015.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

VISA INC-A (V): Free Stock Analysis Report

TOTAL SYS SVC (TSS): Free Stock Analysis Report

FISERV INC (FISV): Free Stock Analysis Report

ALLSTATE CORP (ALL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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