Guggenheim Sees Balanced Risk-Reward For Global Payments After Robust Q4

Global Payments Inc (NYSE: GPN) posted healthy fourth-quarter results Feb. 13, with revenue and adjusted EPS falling in line with expectations.

Management gave positive commentary on SICOM/Xenial, highlighting momentum in the quick service restaurant space and upbeat independent software vendor-related commentary, with a record high number of new partners signed in 2018, according to Guggenheim.

The Analyst

Guggenheim’s Jeff Cantwell maintains a Neutral rating on Global Payments.

The Thesis

Global Payments reported Q4 adjusted EPS of $1.33, representing 24-percent year-on-year growth. Adjusted net revenue plus network fees grew 12 percent year-on-year to $1.04 billion, while adjusted operating margins improved by 80bps to 31.6 percent, Cantwell said in a Tuesday note. 

Guggenheim lowered its adjusted EPS estimate for Global Payments by 2 percent to $6.01 to reflect higher interest expenses, the analyst said.  

Global Payments indicated that the initial customer acceptance of the SICOM-Xenial combination has been positive. The company expects the combined offering to be a valuable addition to its “already-strong” portfolio of 50,000 QSRs and that it will continue to penetrate a $4-billion worldwide total addressable market. 

Global Payments guided to 2019 adjusted net revenue plus network fees of $4.43-$4.49 billion, which represents 12-13-percent year-on-year growth.

Adjusted operating margins are expected to expand by 70bps, while adjusted EPS is projected in the range of $5.90-$6.10, translating to 14-18-percent growth.

The company’s shares have appreciated 21 percent so far in 2019, and the risk-reward appears balanced, Cantwell said. 

Price Action

Global Payments shares were up 0.99 percent at $125.60 at the time of publication Wednesday. 

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