Why Is Global Payments (GPN) Up 8.3% Since the Last Earnings Report?

It has been about a month since the last earnings report for Global Payments Inc. GPN. Shares have added about 8.3% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Global Payments Q1 Earnings Beat Estimates on Revenue Growth

Global Payments' operating earnings per share of $0.85 per share increased 32.8% year over year and beat the Zacks Consensus Estimate by 8%.   

The company reported adjusted net revenue of $803.4 million, up 67.6% year over year.

Segment Details

North America - Adjusted revenues of $597.5 million increased 100.5% year over year. Operating income of $172.4 million was up 119.2% year over year. Operating margin expanded 250 bps. Margin expansion was principally a result of strong organic growth in the company's direct distribution businesses in the U.S., and the realization of expense synergies from the Heartland merger.

Europe - Adjusted revenues of $139.2 million increased 9.3% year over year due to unfavorable foreign currency exchange rates. Local currency net revenue growth in Europe was primarily driven by low double-digit organic growth in the U.K. and mid-teens organic growth in Spain as well as contribution from the Erste joint venture. Operating income of $63.9 million was up 3.7% year over year.

Asia-Pacific - Adjusted revenues of $67.2 million increased 23.7% year over year. Operating income of $21 million was up 26.3% year over year. Growth in the Asia Pacific was primarily driven by double-digit organic growth across Hong Kong, the Philippines, Singapore, Malaysia and China as well as Ezidebit,

Financial and Balance Sheet position

Total cash and cash equivalents as of Mar 31, 2017 was $1.26 billion compared with $1.16 billion as of Dec 31, 2016.

Total long term debt of $4.22 billion was down slightly from $4.26 billion as of Dec 31, 2016.

2017 Guidance

Driven by strong first-quarter earnings and progress with Heartland integration efforts, the company raised its outlook for 2017. It now expects adjusted net revenue in range of $3.38–$3.46 billion, or growth of 19–22% over 2016. Adjusted operating margin is expected to expand as much as 110 bps.

Adjusted earnings per share are now anticipated in the range of $3.78–$3.95, reflecting growth of 19–24% over 2016, which includes the impact of recent refinancing.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter. While looking back an additional 30 days, we can see even more downside. There have been four moves down in the last two months.

Global Payments Inc. Price and Consensus

Global Payments Inc. Price and Consensus | Global Payments Inc. Quote

VGM Scores

At this time, Global Payments' stock has a subpar Growth Score of 'D'. However, its Momentum is doing a lot better with an 'A'.  The stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is suitable solely for momentum investors.

Outlook

While estimates have been broadly trending downward for the stock, the magnitude of these revisions is net zero. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.