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Global Payments Earnings: An Early Look

By Dan Caplinger - Apr 1, 2013 at 4:20PM

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Can the merchant payment processor keep up with its rivals?

The new earnings season is about to begin, but a few laggards are still getting around to reporting their quarterly results. Global Payments (GPN 1.35%) is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, kneejerk reaction that turns out to be exactly the wrong move in light of the news.

The way people pay each other has changed dramatically in just the past few years, and Global Payments is on the cutting edge of trying to transform the electronic-payments industry in an era of smartphones and other mobile devices. Let's take an early look at what's been happening with Global Payments over the past quarter and what we're likely to see in its quarterly report on Tuesday.

Stats on Global Payments

Analyst EPS Estimate

$0.89

Change From Year-Ago EPS

7.2%

Revenue Estimate

$580.3 million

Change From Year-Ago Revenue

8.8%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Will Global Payments pay off for investors this quarter?
Analysts have been more optimistic in recent months about the earnings prospects for Global Payments, as they've boosted their consensus for the just-ended quarter by a penny per share and now see full fiscal-year 2013 earnings coming in $0.06 per share higher than they did. The stock has also done well recently, rising almost 10% in the first three months of 2013.

Global Payments is a big player in the merchant-processing area. Acting as a go-between for merchants to accept payments from customers using popular credit card networks, Global Payments has profited from the big upsurge in use of credit and debit cards over other forms of payment.

But this time last year, Global Payments faced a threat to its survival when a security breach jeopardized 1.5 million cardholders. Card network giants Visa (V 0.84%) and MasterCard (MA 1.19%) both booted the company off their lists of payment processors meeting their security standards, putting Global Payments' future in doubt.

More importantly, competitors are looking to cut Global Payments and other middlemen out of the business. Mobile-payment upstart Square has joined eBay's (EBAY -0.69%) highly successful PayPal in offering simple acceptance of credit cards at low costs. That may not pull high-volume merchants away from Global Payments, but as Square announced a partnership with Starbucks last year, it's entirely possible that traditional merchant processors could disappear in time.

In its quarterly report, watch for Global Payments to benefit from reasonably strong payment-volume growth in the overall economy. If it doesn't, it could be a troubling sign that Global Payments isn't maintaining its market share in the payment processing industry, and that in turn could be a sign of further trouble to come. 

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Stocks Mentioned

Global Payments Inc. Stock Quote
Global Payments Inc.
GPN
$122.10 (1.35%) $1.63
eBay Inc. Stock Quote
eBay Inc.
EBAY
$44.31 (-0.69%) $0.31
Mastercard Incorporated Stock Quote
Mastercard Incorporated
MA
$336.18 (1.19%) $3.96
Visa Inc. Stock Quote
Visa Inc.
V
$199.03 (0.84%) $1.66

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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