Riding on a steady growth momentum, shares of Global Payments Inc. (GPN) reached a new 52-week high of $72.04 on Mar 6. This global service provider of electronic payments witnessed a jump of about 10.3% since the beginning of 2014, when the company reported its fiscal second-quarter 2014 results.
Moreover, the encouraging momentum of this Zacks Rank #2 (Buy) stock is fuelled by strategic initiatives and improved inorganic growth coupled with a strong liquidity and competitive position. Yesterday’s closing price represents a robust one-year return of about 49.2% against a return of 23.6% clocked by the S&P 500 index. Average volume of shares traded over the last three months stands at approximately 754.3K.
Earnings Review
On Jan 8, Global Payments reported fiscal second-quarter 2014 operating earnings per share of $1.07, comfortably surpassing the Zacks Consensus Estimate of $1.02 and the year-ago number of 93 cents. The company delivered a positive earnings surprise of 4.9% during the quarter.
Results reflected higher revenues that were partially offset by higher operating expense that amplified margins. Improved revenue and income from merchant services across North America and international operations contributed to overall growth.
Rationale
Improved results also impelled management to raise its operating earnings outlook for fiscal 2014 to the band of $4.03-$4.10 per share, up 5 cents from the prior projection. This favors a reasonable mid-to-high single digit top-line growth.
The culmination of the acquisition of Payment Processing Inc. (PayPros) earlier this week further propels long-term growth opportunities and expanded network for Global Payments, with minimal adverse impact on fiscal 2014 earnings.
Concurrently, Global Payments has showcased prudent capital management by refinancing debt on improved terms recently, in order to remain sufficiently liquid and lower the borrowing costs. This in turn, leaves ample scope for pursuing capital deployment strategies.We believe the upcoming quarters should benefit from these operating and capital actions, as reflected in the market’s positive reaction.
Some better-ranked insurers that warrant a look are Radian Group Inc. (RDN), VeriFone Systems Inc. (PAY) and Kemper Corp. (KMPR). All these stocks carry the same Zacks Rank as Global Payments.
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