Global Payments Q2 earnings rise, top estimate; cuts FY09 outlook

(RTTNews) - Payment processing and money transfer services provider Global Payments Inc. (GPN | Quote | Chart | News | PowerRating) said Tuesday after the markets closed that second quarter earnings rose 28% from last year, helped by the favorable impact of its June acquisition of a 51% stake in a U.K. joint venture and strong results in its North America segment. The company's quarterly earnings per share also came in above analysts' expectations, but its quarterly revenue fell short of analysts' forecast. At the same time, the company lowered its revenue and earnings guidance for the fiscal year 2009 because of the effects of the strengthening U.S. dollar.

The Atlanta, Georgia-based company reported net income for the second quarter of $48.9 million or $0.60 per share, compared to $38.3 million or $0.48 per share for the year-ago quarter.

The prior year quarter results include restructuring charges of $208,000 related to a facility closure.

On average, 21 analysts polled by First Call / Thomson Financial expected the company to earn $0.57 per share for the second quarter.

Revenues for the second quarter increased 30% to $401.06 million from $308.78 million in the same quarter last year. Seventeen analysts had a consensus revenue estimate of $405.45 million for the second quarter.

Global Payments Chairman, President and CEO, Paul Garcia, said, "We are pleased with our strong second quarter financial performance, in spite of the difficult macro environment." North America continues to benefit from successful pricing initiatives in Canada as well as a solid 16 percent transaction growth in the U.S."

North America merchant services revenue for the second quarter rose 12% to $270.8 million from $241.9 million a year ago, while international merchant services revenue jumped 192% to $95.1 million from $32.6 million last year. Money transfer revenue increased 3% to $35.2 million from $34.3 million a year earlier.

North America continues to benefit from successful pricing initiatives in Canada as well as a solid 16 % transaction growth in the U.S., Garcia noted.

For the first six months of the fiscal year, the company reported net income of $106.4 million or $1.31 per share, compared to $81.9 million or $1.01 per share for the same period last year.

The prior year period results include restructuring charges of $868,000 or $0.01 per share relating to a facility closure.

Revenues for the first-half increased 30% to $806.82 million from $619.76 million in the prior year period.

Based on the significant strengthening of the U.S. dollar this quarter and the related translation impact, the company lowered its fiscal year 2009 revenue guidance to a range of $1.55 billion to $1.58 billion from its prior guidance of $1.64 billion to $1.68 billion.

The company also said it now expect fiscal year 2009 earnings to be $2.14 to $2.21 per share, compared to its prior expectations of $2.37 to $2.45 per share.

The company said its fiscal year 2009 guidance excludes the impact of restructuring and other charges, as well as the impact of future acquisitions, such as its previously announced agreement to acquire ZAO United Card Service in the Russian Federation.

For the fiscal year 2008, the company had reported revenue of $1.27 billion and earnings of $2.01 per share or $1.98 per share, excluding items.

Analysts currently expect the company to earn $2.39 per share on revenue of $1.65 billion for the fiscal year 2009. Analysts' estimates typically exclude special items.

In September, Global Payments agreed to buy ZAO United Card Service from ZAO United Investments for $120 million in cash to expand its indirect payment processing presence in the Russian payments market and to enter the direct acquiring business. Global Payments expects the deal to be accretive to its earnings per share in the first year.

In late June, Global Payments completed the formation of a joint venture with HSBC Bank plc to provide payment-processing services to merchants in the United Kingdom and Internet merchants globally. The joint venture, HSBC Merchant Services, will provide merchant acquiring services to over 135,000 merchant outlets. Under the deal, Global Payments paid HSBC $439 million in cash to acquire a 51% ownership in the joint venture. HSBC controls the remaining 49% and contributed its existing merchant acquiring business in the United Kingdom to the joint venture.

Earlier Tuesday, brokerage Credit Suisse lowered its second quarter earnings estimate for Global Payments to $0.55 per share from $0.59 per share and cut its fiscal year estimate to $2.37 per share from $2.52 per share. The brokerage maintained its Neutral rating on the stock but lowered its price target to $32 from $42.

"DolEx had some bright spots in 1Q09, despite the weaker global economy. As the recession deepens, we are watching for slowing demand in 2Q09 to be offset by stronger operating margins. The stronger dollar should help boost transaction volumes, but overall, FX may still weigh on results" the brokerage noted.

Global Payments shares, which have traded in a range of $29.67 to $49.87 over the past year, closed Tuesday's regular trading session at $34.78, up $1.28 or 3.82% but lost $1.48 or 4.26% in after hours trading.

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