Global Payments Earnings: Results Hold Steady
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.
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