Global Payments Keeps View Intact Despite Coronavirus Scare

Shares of Global Payments, Inc. (NYSE:GPN) jumped 6.5% in yesterday’s trading session after management kept its 2020 earnings guidance intact.

Shares, however, were down by 5.3% at the end of the trading session.

This news came as a positive to investors especially at a time when other players in the same space such as Visa Inc. (NYSE:V) , Mastercard Incorporated (NYSE:MA) and PayPal Holdings, Inc. (NASDAQ:PYPL) have slashed their earnings guidance.

The company recently mentioned that it has not witnessed any major negative impact on Europe, America, Australia and New Zealand businesses.

The company, however, estimates an impact of nearly $15 million on its Asia-Pacific business, or about 80 basis points impact on first-quarter revenue growth. But this will not have an effect on the company’s 2020 earnings.

Travel and entertainment (T&E) business, which has been mostly affected by travel cancellation to prevent the spread of coronavirus-led sickness, contributes a very small portion (nearly 2%) to its revenues globally.

Moreover, a portion of the company’s business, which comes from healthcare (nearly $2 billion) is resilient enough and does not depend on the underlying health of the consumer on a day-to-day basis. Thus, any kind of unexpected dent in revenues will be handled by the company comfortably.

The company also highlighted its performance in the last downturn in 2008, during which Total System’s issuer processing grew and Global Payments posted mid single-digit growth.

The company expects to grow its business in the first quarter of 2020. Moreover, NetSpend segment is expected to add a few hundred basis points to its revenue growth, due to the CFPB rule, which went into effect last April.

The company expects to exit the year with maximum organic revenue growth and earnings growth, which make investors feel good about the momentum in its business.

In the past month, the stock has declined by 15.1% compared with the industry’s loss of 17.9%. We believe this decline in share price presents a good opportunity to take a position in the company, which is set for solid long-term growth.

The company’s forward 12-month price-to-earnings (P/E) ratio of 22.9 compares favorably with the industry’s P/E of 23.7. The company’s long-term growth rate of 18.8% is higher than the industry’s 14.6%.
Global Payments carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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