Can Total System (TSS) Pull Off A Surprise In Q2 Earnings?

Payment processor and financial services provider, Total System Services, Inc. (NYSE:TSS) is scheduled to release second-quarter financial results after the closing bell on Jul 26.

In the last reported quarter, the company beat the earnings estimate by 8.77%. Moreover, the company posted a positive earnings surprise in three out of the last four quarters, with an average beat of 3.58%. Let’s see how things are shaping up for this announcement.

Factors at Play

We expect strong revenue and transaction growth with increased accounts on file from the company’s international business.

The company’s North America segment will see higher revenues from four contract extensions signed in the first quarter that included commercial, consumer and managed services as well as a healthcare contract renewal. Broad-based growth in the company’s core offerings as well as growth in its value-added services, managed services and loyalty services should revenues.

The NetSpend segment will likely see top-line growth from significant investments in this business during the fourth quarter of 2015.

Also, the company expects continued strength in business with China Union Pay.

However, increased expenses and significant exposure to interest rate risks associated with the investment of available cash as well as foreign exchange issues raise caution.

Earnings Whispers

Our proven model does not conclusively show that Total System is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as elaborated below.

Zacks ESP: The Most Accurate estimate of Total System is pegged at 65 cents per share, two cents below the Zacks Consensus Estimate. The Earnings ESP is thus -2.99%.

Zacks Rank: Total System carries a Zacks Rank #2. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.

TOTAL SYS SVC Price and EPS Surprise

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Global Payments Inc. (NYSE:GPN) has an Earnings ESP of +1.47% and a Zacks Rank #3. The company is scheduled to report second-quarter earnings results on Jul 28.

MasterCard Inc. (NYSE:MA) has an earnings ESP of +1.11% and a Zacks Rank #3. The company is scheduled to report second-quarter earnings results on Jul 28.

LPL Financial Holdings Inc. (NASDAQ:LPLA) has an Earnings ESP of +2.33% and a Zacks Rank #3. The company is scheduled to report second-quarter earnings results on Jul 28.