Shares of Global Payments rose nearly 5% Thursday, one day after the large fintech reported second quarter result that beat Wall Street expectations. Global Payments said Aug. 7 that adjusted earnings per share increased 12% to $2.93 for the three months ended June 30 compared to $2.62 for the same time period in 2023. The $2.93 was 2 cents more than the $2.91 expected by analysts. Adjusted Q2 net revenue rose 6% to $2.32 billion.
Adjusted net revenue for merchant solutions, Global Payments biggest segment, gained nearly 8% to $1.81 billion.
“Encouragingly, while Merchant operating margin improved modestly by around 30 basis points year over year, this was around 20 basis points ahead of the Street and much better than feared given management’s prior comments that margin would likely be flat in 2Q,” said John Davis, a Raymond James analyst, in an Aug. 7 note.
Global Payments offers technology and services used by companies in sectors that include restaurants, retail, health care, and education. Its shares have rebounded since dropping to a 52-week low of $91.60 in June. The stock on Thursday rose 4.6% to close at $104.60, but gave back some of those gains on Friday, trading at $103.48 in the afternoon.
Global Payments CEO Cameron Bready said Wednesday that the company had acquired takepayments, which provides payments for UK merchants, as well as an unnamed early stage technology firm that it was partnering with in Europe, according to an Aug. 7 transcript of the Q2 earnings call. The deals have a combined price tag of $370 million, Raymond James’ Davis said. Takepayments is “expected to contribute around 100 bp to 2H Merchant growth, but the tailwind will be offset by a worsening FX headwind,” he wrote in the note. (Reuters reported in February that Global Payments was near buying takepayments for more than $250 million.)
Some bankers wondered if Global Payments would announce more acquisitions soon, possibly at its Sept. 24 investor conference in New York City. The company was seeking a buyer for AdvancedMD, a provider of medical billing software, including for payments, to physician practices, Coins2Day reported in March.
Josh Whipple, Global Payment CFO, reiterated the company’s 2024 outlook. He expects adjusted net revenue to be in a range of $9.17 billion to $9.30 billion, and adjusted earnings per share to be in a range of $11.54 to $11.70, according to a statement. Annual adjusted operating margin for 2024 is expected to expand by up to 50 basis points, Whipple said.
Davis, of Raymond James, reiterated his Outperform rating and $144 price target for Global Payments. “All told, we are encouraged by better Merchant margins, which was a key hangup for investors following the first quarter print, and with the stock trading at just 8 times our 2025 estimated adj. EPS (~50% discount to S&P 500 Equal Weight) despite low-double-digit normalized EPS growth, we continue to view the risk/ reward favorably,” he wrote.
