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Global Payments Earnings: Strong Start to the Year

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Securities In This Article
Global Payments Inc
(GPN)

Global Payments GPN delivered a strong first quarter, in our view, with adjusted net revenue up 5% year over year, or 9% excluding currency effects and divestitures. The company also saw strong margin improvement in the quarter. While macroeconomic uncertainty remains, we think the quarter shows the business holding up well. We will maintain our $179 fair value estimate for the narrow-moat company and continue to see shares as undervalued.

Growth in the merchant segment largely held in line with the level from the last two quarters. On an organic basis, adjusted net revenue increased 10% year over year, driven by constant currency revenue growth of 10%. This level of volume growth is roughly in line with what we saw from the networks, suggesting Global Payments is holding its share. Given that we see scale as the dominant competitive factor for acquirers, we think maintaining share is critical to maintaining the company’s moat.

The issuer segment saw adjusted net revenue grow 7% year over year on an organic basis. This represents some acceleration from recent results, and growth in the quarter was a bit ahead of our long-term expectations.

Adjusted operating margins improved to 43.1% from 41.1% last year, with the company running ahead of its target of up to 120 basis points of improvement for the full year. However, the company will absorb the lower margin EVO acquisition fully in the next 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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About the Author

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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