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Global Payments Earnings: Results Hold Steady

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Global Payments’ GPN third-quarter results show the company holding steady, with solid growth in line with the last quarter and margins continuing to improve. We will maintain our $179 fair value estimate and narrow moat rating. We think shares are undervalued and that the company’s stability supports our view on the company’s long-term prospects and should lessen fears of disruption.

Overall adjusted revenue grew 9% year over year. The merchant segment saw 9% adjusted revenue growth as well, in line with the previous quarter. Management commentary echoed what we’ve heard from peers, in that consumer spending is holding up well. We think the market’s fears center on this business, and we are pleased to see the company maintain solid growth. The issuer segment saw 6% adjusted revenue growth, roughly in line with our long-term expectations for this business and a slight uptick from the previous quarter.

Adjusted operating margins improved to 45.7% from 45.2%. The rate of improvement was lower than what we’ve seen in previous quarter, with the EVO acquisition being a bit of a drag. However, the company believes it can generate $135 million in synergies from this acquisition.

Management still expects at least 120 basis points of margin improvement for the full year. We think solid growth and the scalability of the business will allow for margin improvement over time, but our long-term expectations are more in line with the rate of improvement in the quarter.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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Brett Horn

Senior Equity Analyst
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Brett Horn, CFA, is a senior equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers insurers and credit bureaus. He also oversees the equity research team’s stewardship rating methodology.

Before joining Morningstar in 2006, Horn worked in the banking industry for about a decade, most recently as a commercial loan officer for First Bank, where he was responsible for underwriting loans and managing relationships with middle market clients. Before that, Horn worked for Mizuho Corporate Bank, where he managed loan portfolios and client relationships, primarily with Fortune 500 companies.

Horn holds a bachelor’s degree in business administration, with a concentration in finance, from the University of Wisconsin and a master’s degree in business administration from the University of Illinois. He also holds the Chartered Financial Analyst® designation. He ranked first in the business and industrial services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

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