BofA Sees 12% Upside In Global Payments

Global Payments Inc GPN reported fiscal fourth-quarter results Feb. 15, with an earnings beat and revenues that fell shy of estimates. The payments processor also issued initial full-year 2018 guidance. 

The Analyst

Bank of America Merrill Lynch analyst Jason Kupferberg reiterated a Buy rating for Global Payments and increased the price target from $113 to $127, suggesting roughly 12-percent upside.

The Thesis

Global Payment's initial 2018 guidance and bullish commentary on future cycle guidance prompted BofA to increase its 2018/2019 estimates, Kupferberg said in a note. 

BofA estimates earnings per share of $5.01 for 2018 and $5.90 for 2019. This compares to prior estimates of $4.61 and $5.33 per share, respectively, and the company's guidance of $4.95 and $5.15.

The improved outlook is due to a lower effective tax rate and continued strong margin performance, the analyst said.

To reflect the exclusion of $73 million in gaming cash advance revenue due to a new accounting rule, BofA lowered its net revenue estimate by 2 percent for 2018 and 2019. The adjustment to revenue estimates has no impact on earnings, Kupferberg said. 

The higher price target reflects continued strong operational results and bullish commentary on the intermediate outlook, the analyst said. 

The Price Action

Global Payments shares are up over 46 percent over the past year.

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