Global Payments Inc. ($GPN) growing payments volume, accretive acquisitions, strong performing Merchant Solutions business and streamlining of business make it worth retaining in one’s portfolio. Also, its favorable growth estimates are confidence boosters for investors.
Optimistic Growth Projections
The Zacks Consensus Estimate for GPN’s 2023 earnings is pegged at $10.32, indicating a 10.7% increase from the year-ago reported figure of $9.32. The same for GPN’s 2023 revenues is pegged at $8.6 billion, indicating a 5.8% increase from the year-ago reported figure of $8.1 billion.
Tailwinds
Global Payments is a Fortune 500 leading payments technology company providing software and services to financial institutions across 170 countries. Growth in customer base, accelerating use of digital payments and ongoing recovery from the pandemic should boost growth in future. Merchant Solutions contributed 69.1% to the total revenues in 2022, and this figure is expected to grow further as transaction fees will boost on the back of volume growth. The company projects adjusted net revenues within $8,575-$8,675 million this year, indicating 6-7% growth from the 2022 reported figure. It acquired EVO Payments, Inc. in August 2022, expanding its geographic presence, supplements its business-to-business and most importantly, supports its technology-based payments strategy.
Global Payments divested the consumer portion of its Netspend business and entered into a definitive agreement to sell its gaming business. These moves should lead to lower expenses and improve the bottom line. GPN focuses on top-tier strategic partnerships to grow its business, such as Mastercard to improve the dispute resolution process for 25 million car owners and Mondu to serve financial services customers. The company's financial flexibility enables it to invest in technology, strategic partnerships and return capital to shareholders. It returned more than $3 billion in 2022 via share repurchases and dividends. An increase in the capacity of the company's share buyback program was made to bring the total authorization amount to $1.5 billion. This should instill confidence in shareholders.
Key Concerns
However, there are a few factors that have been impeding the stock’s growth lately.
The performance of Consumer Solutions segment is a concern. This segment is delivering poor performance due to reduced consumer spending and volumes.
Rising operating expenses are also harming the company’s margins. Despite cost management efforts, operating expenses rose 16.3% year over year. Nevertheless, I believe that a systematic and strategic plan of action will drive growth in the long term.
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