On Thursday, B.Riley maintained a Buy rating on Global Payments (NYSE:GPN) stock, with a consistent price target of $194.00 following the company's third-quarter earnings report for 2024. Global Payments reported adjusted earnings per share (EPS) of $3.08, a 12% year-over-year increase, which slightly exceeded expectations. The company's revenue saw a 6% year-over-year increase, reaching $2.4 billion. Operating margins also showed improvement, expanding by approximately 43 basis points.
The company is on track to further increase operating margins by 50 basis points in 2024. Global Payments confirmed its EPS growth guidance for 2024, projecting an 11% to 12% increase, which translates to an EPS range of $11.54 to $11.70. Despite observing some softness in certain international markets, commercial card spending, and card issuance with some financial institutions, the firm believes these challenges were anticipated based on prior industry events and statements from management.
In addition to its earnings, Global Payments announced the divestiture of AdvanceMD for $1.125 billion, a transaction valued at a high teen multiple of EBITDA. This sale is part of the company's strategy to divest approximately $500 million to $600 million in revenue from non-core assets, marking a significant step in this direction.
Despite Global Payments' shares underperforming in comparison to the market and its sector throughout the year, B.Riley posits that the current market valuation does not reflect the company's growth potential and return on operating capital. The firm's valuation of Global Payments is based on a 15 times multiple of its estimated 2025 EPS of $12.82, leading to the $194 price target. The analyst firm suggests that the current forward valuation, at 8 times the estimated 2025 EPS, is undervalued and anticipates a potential re-rating in the upcoming year.
In other recent news, Global Payments Inc. reported a 6% increase in adjusted net revenue to $2.36 billion and a 12% rise in adjusted earnings per share to $3.08 in its third-quarter results for 2024. The company also announced the sale of its AdvancedMD business to Francisco Partners for $1.125 billion as part of its strategic initiatives. In addition to this, Global Payments highlighted its expansion plans, which include the launch of point-of-sale (POS) offerings in Germany and other European and Latin American markets.
The company's Merchant Solutions sector saw a 7% revenue growth, driven by robust POS sales and strategic expansions. However, the Issuer Solutions revenue growth was affected by softer commercial card transaction volumes and cautious spending from financial institution partners. Despite these challenges, Global Payments remains optimistic about its transformation efforts, particularly in cloud solutions, with a commercial launch expected in 2025.
The company's adjusted net revenue projection for 2024 is between $9.17 billion and $9.30 billion, with an expected growth of 6% to 7%. The adjusted earnings per share for the year are forecasted to be between $11.54 and $11.70, indicating an 11% to 12% growth. These recent developments underline Global Payments' strategic focus on enhancing shareholder returns and maintaining a healthy balance sheet.
InvestingPro Insights
Global Payments' recent performance and strategic moves align with several key insights from InvestingPro. The company's adjusted EPS growth of 12% year-over-year reflects its profitability, which is supported by an InvestingPro Tip indicating that Global Payments has been profitable over the last twelve months. Additionally, the company's revenue growth of 6% is consistent with the InvestingPro data showing a 6.63% revenue growth over the last twelve months.
The company's attractive valuation, as highlighted by B.Riley's analysis, is further reinforced by InvestingPro data. Global Payments' P/E ratio stands at 18.69, with an adjusted P/E ratio of 15.65 for the last twelve months as of Q2 2024. This relatively low P/E ratio, combined with the company's growth prospects, supports the InvestingPro Tip that Global Payments is trading at a low P/E ratio relative to its near-term earnings growth.
For investors seeking more comprehensive analysis, InvestingPro offers additional insights, with 6 more tips available for Global Payments. These tips could provide valuable context for understanding the company's financial health and future prospects in light of its recent earnings report and strategic divestitures.
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