Global Payments Earnings: Strong Start to the Year
Global Payments GPN delivered a strong first quarter, in our view, with adjusted net revenue up 5% year over year, or 9% excluding currency effects and divestitures. The company also saw strong margin improvement in the quarter. While macroeconomic uncertainty remains, we think the quarter shows the business holding up well. We will maintain our $179 fair value estimate for the narrow-moat company and continue to see shares as undervalued.
Growth in the merchant segment largely held in line with the level from the last two quarters. On an organic basis, adjusted net revenue increased 10% year over year, driven by constant currency revenue growth of 10%. This level of volume growth is roughly in line with what we saw from the networks, suggesting Global Payments is holding its share. Given that we see scale as the dominant competitive factor for acquirers, we think maintaining share is critical to maintaining the company’s moat.
The issuer segment saw adjusted net revenue grow 7% year over year on an organic basis. This represents some acceleration from recent results, and growth in the quarter was a bit ahead of our long-term expectations.
Adjusted operating margins improved to 43.1% from 41.1% last year, with the company running ahead of its target of up to 120 basis points of improvement for the full year. However, the company will absorb the lower margin EVO acquisition fully in the next quarter.
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