Global Payments (GPN) Revenue Misses in Q3, Revenue Increases Year-over-Year


Global Payments Inc. GPN reported Q3 2022 adjusted earnings per share (EPS) of $2.48, which missed Zacks’ consensus estimate by a hair’s breadth. Still, net income was up 14% year over year.

GPN’s adjusted net revenue grew 3% year-over-year to $2,058.2 million in the third quarter. The top line also beat the consensus mark by a hair.

Quarterly results were hampered by high operating costs resulting from higher selling, general and administrative expenses. However, the decline was partly offset by strong contributions from its merchant and issuer businesses.

Global Payments Inc. Price, Consensus, and EPS Surprise

Global Payments Inc. price-consensus-eps-surprise-chart | Submission from Global Payments Inc.

Operating performance

Adjusted operating margin of 45.2% improved 240 basis points (bps) year over year in the quarter under review.

Total operating expenses increased 5.4% year over year to $1,898.9 million.

Adjusted operating income of $930.6 million increased 8.8% year-over-year in the third quarter.

Industry update

As the divestment of the consumer business of Global Payments is imminent and changes have been made in the way the business is operated, management has reorganized the businesses that were previously part of the Business and Consumer Solutions segment. The business-to-business part is integrated into the Issuer Solutions segment, while the consumer unit is attached to the Consumer Solutions segment. Subsequently, the three reportable segments emerged as Merchant Solutions, Issuer Solutions and Consumer Solutions from Q3 2022.

Sector performance

Merchant solutions: Segment adjusted revenue of $1,450 million increased 6.8% year-on-year driven by global constant currency volume growth of 11%, excluding the impact of exiting the Russian business. The figure is lower than Zacks’ consensus estimate of $1,481 million. Adjusted operating profit rose 8.2% year over year to $724.4 million.

Solutions for issuers: Adjusted revenue for the segment was $489.1 million, up 1.7% year-over-year in the third quarter. The figure was below the consensus mark of $497 million. Segment results were driven by a 25% growth in commercial card transactions. Adjusted operating income increased 9% year over year to $226.8 million.

Consumer solutions: The sector reported adjusted revenue of $142.6 million, down 22.3% year-on-year in the quarter under review. Adjusted operating income of $54 million increased 24.2% year over year.

Financial position (as of September 30, 2022)

Global Payments ended the third quarter with cash and cash equivalents of $1,993.8 million, up 0.7% from the level at the end of 2021.

Total assets of $43.9 billion were down 3% from the level at the end of 2021.

Long-term debt of $12.3 billion increased 7.7% from December 31, 2021. Current portion of long-term debt was $1,157.8 million at the end of the third trimester.

Total equity fell 11.6% from end-2021 levels to $22.9 billion.

For the first nine months ended September 30, 2022, net cash provided by operating activities was $1,534.5 million, down 24.3% from the comparable period level of the previous year.

Capital deployment

Global Payments repurchased shares worth $889.7 million during the third quarter. An increase in the capacity of GPN’s share buyback program has been made to bring the total amount authorized to $1.5 billion.

Management has sanctioned a quarterly dividend of 25 cents per share, which will be paid on December 30, 2022 to its shareholders of record as of December 16.

Company update

Global Payments has signed a definitive agreement to buy the leading payments technology and services provider EVO Payments EVOP. GPN had also signed an agreement to divest Netspend’s consumer assets to Searchlight Capital and Rev Worldwide. Both transactions, which are expected to close in the first quarter of 2023 (subject to regulatory scrutiny and customary approval), have received Hart-Scott-Rodino (HSR) clearance in the United States.

Orientation 2022

Management continues to expect 10-11% growth in adjusted net revenue compared to the reported 2022 figure, at constant currencies and before divestitures.

Global Payments reiterates revenue guidance in the Merchant Solutions and Issuer Solutions segments. At constant exchange rates, revenue from both segments is expected to continue to post low double-digit growth and mid-to-high single digit growth, respectively, in 2022.

Adjusted EPS, at constant currency, is still expected between $9.53 and $9.75, the midpoint of which suggests 17-20% growth from the 2021 reported figure. GPN expects to convert nearly 100% of adjusted net income in adjusted free cash flow.

Management expects the adjusted operating margin to increase by up to 170 basis points this year compared to the 2021 level, while the previous estimate called for the measure to increase by up to 150 basis points from the figure published there. one year old.

Zacks Rank

Global Payments currently carries a Zacks rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other releases from the business services sector

Among the players in the business services sector which have published their results for the third quarter so far, the net results of Mastercard Incorporated MA and Republic Services, Inc. RSG beat Zacks’ respective consensus estimate.

Mastercard reported adjusted earnings of $2.68 per share in the third quarter of 2022, which beat Zacks’ consensus estimate by 4.3%. Net income increased 13% year-on-year. MA’s revenue was $5.8 billion, up 15% year-over-year in the quarter under review. The top line beat the consensus mark of 1.8%. Gross dollar volume (GDV) improved 11% year-over-year in local currency to $2.1 trillion in the third quarter.

Republic Services’ third-quarter 2022 adjusted earnings per share (excluding 2 cents of one-time items) of $1.34 exceeded the consensus mark of 10.7% and improved 20.7% from a year to year. Quarterly revenue of $3.6 billion beat the consensus estimate of 1.9% and rose 22.6% year-over-year. Revenue from RSG’s Collection segment totaled $2.43 billion, up 14.1% year-over-year.

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