3 Payment Processing Stocks Poised For Q3 Earnings Beat
Zacks Investment Research | Oct 11, 2017 05:20AM ET
Payment processors have performed quite well so far this year, thanks to an improving U.S economy, low unemployment, a drop in inflation, and healthy consumer confidence that resulted in increased business volumes.
The revolutionary shift from cash payments to online transactions continues to further propel transaction volume growth.
Card Sales Aided by Economic Growth
The economic growth in the United States has led to higher disposable income, resulting in greater customer spending. In the environment where plastic is preferred over paper and borrowings are chosen over savings, economic growth has resulted in a steep rise in the companies’ card sales volume. This is expected to drive the industry’s top line in third-quarter 2017.
Mergers and Acquisitions to Aid Revenue Growth
The players in the space are gearing up for growth through mergers and acquisitions, alliances, deals and pacts. Recent acquisition of NuData Security by Mastercard Inc (NYSE:MA) , Heartland Payments by Global Payments, Inc. (NYSE:GPN) , investment by Visa Inc (NYSE:V) in Swedish company Klarna and many more indicate rise in consolidation activity in the space, which is expected to aid top-line growth.
Forex Impact on Earnings
Players in this industry have vast international operations which have grown over the years through tuck-in acquisitions, strategic alliances and joint ventures. This exposes them to foreign exchange volatility. Moreover, the dollar index fell 2.66% in the third quarter, which will weigh on the margins.
Increased Expenses
We also expect to see an increase in operating expenses led by higher marketing spend by players in order to woo more customers in a competitive industry. Also increased investments in digitalization and geographic expansion will hurt the bottom line, before bringing results.
Industry Rank and Price Performance
The industry ’s superior performance is evident from its rally of 28.7% in the last year compared with 18.5% gain registered by the S&P 500. Therefore, investing in stocks in this space would generate smart returns over time.
Stocks to Consider
We zeroed in on three stocks that are poised for an earnings beat this quarter. Our proven model shows that stocks with Zacks Rank #1 (Strong Buy), 2 (Buy) and 3 (Hold), when combined with a positive Earnings ESP , has the potential to beat earnings expectations.
Get The News You Want
Total System Services Inc (NYSE:TSS) is one of the world's largest companies for outsourced payment services. Its earnings have surpassed expectations in each of the last four quarters with an average beat of 3.5%. It is set to release third-quarter results on Oct 24, after the market closes.
The company’s Zacks Rank #2 and Earnings ESP of +0.21% strengthens its potential for a third-quarter beat. The expected long-term earnings growth rate for the company is 12%, in line with the industry average. Shares of Total System have gained 44.5%, handily outperforming the industry’s rally in the last year.
Visa operates a retail electronic payments network worldwide. Its earnings have surpassed expectations in each of the last four quarters with an average beat of 8.4%. It is set to release third-quarter results on Oct 25, before the market opens.
The company’s Zacks Rank #2 and Earnings ESP of +2.76% increase its potential for a third-quarter beat. The expected long-term earnings growth rate for the company is 16.3%, better than the industry average. Shares of Visa have gained 30.8%, outperforming the industry’s rally in the last year.
Vantiv, Inc. (NYSE:V) is a leader in global money transfer that provides fast, reliable and convenient ways to transfer money. It has delivered positive surprises in each of the last four quarters with an average beat of 3.6%. It is set to release third-quarter results on Oct 26, before the market opens.
The company’s Zacks Rank #3 and Earnings ESP of +0.48% bolsters its potential for a third-quarter beat. The expected long-term earnings growth rate for the company is 14.5%, more than the industry average. Although, shares of Vantiv have gained 27.6%, marginally underperforming the industry’s increase in the last year, its strong fundamentals are expected to keep the rally alive.
Wall Street’s Next Amazon (NASDAQ:AMZN)
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.