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Earnings Results: Global Payments stock skids after earnings as forecast underwhelms

Shares of Global Payments Inc. dropped 9.1% in Tuesday trading after the payment-technology company posted better-than-expected results for its most recent quarter, but delivered an outlook that implied weaker expectations for the current quarter than some had been anticipating.

Global Payments
GPN,
-9.24%

reported third-quarter net income of $296.7 million, or $1.01 a share, up from $221.0 million, or 74 cents a share, in the year-prior quarter. On an adjusted basis, Global Payments earned $2.18 a share, up from $1.71 a share a year earlier and ahead of the FactSet consensus, which called for $2.14 a share.

The company’s GAAP revenue increased to $2.20 billion from $1.92 billion. The FactSet consensus was for $2.15 billion, based on estimates from six analysts who track the metric. Global Payments delivered adjusted revenue of $2.00 billion, up from $1.75 billion in the year-earlier period. Analysts had been looking for $1.99 billion.

“We exit the pandemic better off than we entered it,” Chief Executive Jeff Sloan said on the company’s earnings call.

The company raised the lower bounds of its full-year outlook and now expects adjusted net revenue of $7.71 billion to $7.73 billion as well as adjusted earnings per share of $8.10 to $8.20.

“Implied FQ4 revenue and EPS are ~2%/3% below the Street, respectively, which is likely to weigh on shares today,” Barclays analyst Ramsey El-Assal wrote in a note to clients.

Backing already-reported results, the high end of the company’s forecast implies expectations for $1.977 billion in fourth-quarter adjusted revenue, whereas the FactSet consensus is for $1.989 billion. The high end of the adjusted EPS forecast implies expectations for $2.16, while the FactSet consensus models $2.18.

The results and outlook from Global Payments reflect “moderating consumer spending (quarter over quarter) given the unwinding of stimulus payments, Asia lockdown as well as [a] corporate travel pause,” Wedbush analyst Moshe Katri told MarketWatch.

Fellow payments companies Visa Inc.
V,
-1.56%
,
Mastercard Inc.
MA,
-1.67%
,
and Fiserv Inc.
FISV,
-2.56%

gave similar signals in their recent reports, he continued. “Investors likely under-appreciated these trends, which are generating muted earnings results across the sector.”

Susquehanna’s James Friedman also highlighted a slowdown in the company’s consumer business, though he said in a note to clients that merchant trends “looked good.”

Tuesday’s stock action marks the second notable slide for Global Payments shares in the past week. The stock dropped 7.6% last Wednesday after rival Fiserv offered commentary on the current quarter that was less upbeat than some were expecting.

The Fiserv results last week highlighted to MoffettNathanson analyst Lisa Ellis that investors have high standards for Fiserv and its peers, Global Payments and Fidelity National Information Services Inc.
FIS,
-4.24%
,
driven in part by fears that the companies will be disrupted by hot fintech players.

“Fiserv (along with its peers), is in a ‘can do no right’ situation: Negative data points are magnified, positive data points are largely ignored,” Ellis wrote following Fiserv’s report.

Raymond James analyst John Davis seemed to take a similar view after Global Payments’ own report.

“Though we think the stock down 10% on the 4Q implied guide a few pennies shy and semantics around 2022 is a significant overreaction, it is just more evidence of extremely bearish sentiment on the group,” he wrote in a note to clients while maintaining a bullish rating.

Davis added that the risk-reward balance on Global Payments shares “has become borderline absurd,” with the stock trading at about 13.5 times his earnings-per-share expectations for 2022, but he also said that “patience is required as GPN has clearly become a show-me story that will likely take several quarters to re-rate.”

Global Payments shares have lost 39% so far in 2021, while FIS shares have dropped 23% and Fiserv shares have declined 13%. The S&P 500
SPX,
+0.37%

is up 23% on the year.

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