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Why Global Payments Stock Crashed 10% Today

By Rich Smith – Nov 2, 2021 at 2:30PM

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This isn't how earnings beats are supposed to work.

What happened

Shares of payments technology company Global Payments (GPN 0.75%) are getting destroyed today, down 10% in 1:50 p.m. EDT trading despite the fact that the company just "beat earnings" in its third-quarter earnings report this morning.

Analysts had forecast Global Payments would earn $2.14 per share (adjusted) on sales of less than $2 billion this past quarter. In fact, Global Payments reported profits of $2.18 per share and sales of $2.2 billion.  

White arrow declining sharply atop a stock ticker tape display bathed in red.

Image source: Getty Images.

So what

CEO Jeff Sloan pointed out that Global Payments' results were a "record" for a Q3 report, with sales up nearly 15% year over year. And granted, when calculated according to generally accepted accounting principles (GAAP), Global Payment's net profit amounted to only $1.01 per share -- not the $2.18 pro forma figure. But even so, those net profits climbed 36.5% year over year.  

Helping to contribute to the spike in profits was a 310 basis point improvement in operating profit margin -- now 18.2%.

Now what

Guidance-wise, Global Payments assured investors that the company is on track to record pro forma earnings of anywhere from $8.10 to $8.20 per share by the end of this year -- well above the $8.02 per share that Wall Street was looking for. The company's positive forecast implies it will "beat earnings" again in Q4.

About the only black mark -- and it's really more of a faded, light gray -- was on revenue guidance. Global Payments guided toward $7.71 billion to $7.73 billion in revenue for all of fiscal 2021, a range just shy of Wall Street's hoped-for $7.74 billion. Unfortunately, when you factor in the $210 million revenue "beat" from Q3, the company appears to imply it will "miss" on sales in Q4.

If you ask me, it's this warning of a sales miss that is weighing on the shares today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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