UPDATE: JMP Securities Upgraded Total System Services to Market Outperform

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In a report published Monday, JMP Securities analyst David Scharf upgraded
Total System Services, Inc.
TSS
from Market Perform to Market Outperform and maintained their $35 PT. Total System Service's 2Q13 conference call was upbeat compared to earlier quarters in regard to consumer behavior and potential NetSpend synergies. Scharf commented on TSS's improved transaction and volume trends at Visa and Mastercard, international margins expected improvements, easing YoY comps from 2012 price adjustments, and the "beginning of an aggressive debt paydown following the NetSpend acquisition." JMP Securities believes TSS's management is conservative anticipating a 13.5% YoY growth for prepaid business compared with 23% growth in 2Q. The analyst further noted the a 14% transaction growth for Visa in 2Q13 and a 14% growth for Mastercard in July and August. Scharf anticipates operating margins to expand beyond the "surprising" 37.2% in 2Q13. The analyst also recognized the safety and visibility in a volatile market associated with TSYS' business model. JMP Securities reported FY13 model adjustments of $2,149.2M (versus consensus of $2,149.1M) in projected revenue, adjusted EBITDA of $612.3M, and Adjusted Cash EPS of $1.71 (versus consensus of $1.71). Anticipated FY14 model projects revenue of $2,569.3M (versus consensus of $2,560.5M) in projected revenue, adjusted EBITDA of $740.3M, and Adjusted EPS of $2.01 (versus consensus of $2.03). "FY2015 forecast which anticipates revenue before reimbursables, Adjusted EBITDA, and Adjusted Cash EPS of $2,584.7 million (up 11.3% Y/Y), $828.1 million (up 11.9% Y/Y), and $2.28 (up 13.5%), respectively." Total Systems Services closed at $29.59 on Friday and is currently +1.12%.
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Posted In: Analyst ColorUpgradesPrice TargetAnalyst RatingsJMP Securities. David Scharf
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