Global Payments (GPN, Financial) has seen its stock rating lowered by RBC Capital from "Outperform" to "Sector Perform." This adjustment comes as RBC reevaluated the company's recent strategic decisions, including the acquisition of Worldpay and the sale of its Issuer business.
The price target for the Global Payments stock was reduced significantly from $139 to $86. RBC Capital expressed concerns that the anticipated simplification of Global Payments' operations appears to be delayed, increasing the risk associated with execution. The strategic use of proceeds from the Issuer business sale, originally intended to streamline operations at Global Payments, has shifted towards acquiring a business with lower margins and higher volatility.
This shift in strategy and the resultant financial implications have prompted RBC Capital to reevaluate their expectations for Global Payments, leading to the downgrade. Investors have been advised of the heightened execution risks in light of these changes.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 27 analysts, the average target price for Global Payments Inc (GPN, Financial) is $110.67 with a high estimate of $194.00 and a low estimate of $65.00. The average target implies an upside of 53.59% from the current price of $72.06. More detailed estimate data can be found on the Global Payments Inc (GPN) Forecast page.
Based on the consensus recommendation from 35 brokerage firms, Global Payments Inc's (GPN, Financial) average brokerage recommendation is currently 2.4, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Global Payments Inc (GPN, Financial) in one year is $124.21, suggesting a upside of 72.37% from the current price of $72.06. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Global Payments Inc (GPN) Summary page.
GPN Key Business Developments
Release Date: February 13, 2025
- Adjusted Net Revenue (Full Year 2024): $9.15 billion, an increase of 6% from the prior year.
- Adjusted Operating Margin (Full Year 2024): Improved 40 basis points to 45%.
- Adjusted Earnings Per Share (Full Year 2024): $11.55, an increase of 11% compared to 2023.
- Adjusted Net Revenue (Q4 2024): $2.29 billion, an increase of 5%.
- Adjusted Operating Margin (Q4 2024): Increased 40 basis points to 45.2%.
- Adjusted Earnings Per Share (Q4 2024): $2.95, an increase of 11% or 12% on a constant currency basis.
- Merchant Solutions Adjusted Net Revenue (Q4 2024): $1.76 billion, reflecting growth of 6%.
- Issuer Solutions Adjusted Net Revenue (Q4 2024): $542 million, reflecting growth of 3% on a constant currency basis.
- Adjusted Free Cash Flow (Q4 2024): Approximately $814 million, representing roughly 110% conversion rate of adjusted net income.
- Adjusted Free Cash Flow (Full Year 2024): $2.7 billion, representing a roughly 95% conversion rate of adjusted net income.
- Capital Expenditures (Full Year 2024): $675 million, equating to roughly 7% of revenue.
- Net Leverage Position (End of Q4 2024): Decreased to 3.2 times.
- Available Liquidity (End of Q4 2024): $3.8 billion.
- Weighted Average Cost of Debt: 3.36%.
- Share Repurchases (Full Year 2024): 12.7 million shares for $1.5 billion.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Global Payments Inc (GPN, Financial) achieved 6% adjusted net revenue growth for the full year 2024, with record adjusted operating margins and double-digit adjusted earnings per share growth.
- The company generated approximately $3 billion of adjusted free cash flow and returned $1.8 billion to shareholders.
- GPN expanded its POS and software business, achieving high teens new locations growth in 2024, particularly in the restaurant and retail verticals.
- The company successfully completed 17 customer implementations in its Issuer Solutions segment in 2024, ending the year with record traditional accounts on file of $885 million.
- GPN's operational transformation initiatives are expected to unlock more than $600 million of annual run rate operating income benefit by the first half of 2027, an increase from the initial outlook of $500 million.
Negative Points
- The company faced incremental FX headwinds, which impacted financial results despite achieving growth targets.
- GPN is in the process of exiting several small markets in Asia Pacific where it is subscale and sees limited opportunity for expansion.
- The company is experiencing softer hiring trends in its pay card business, negatively impacting growth by nearly a point.
- Commercial card volumes remain consistent with previous trends, as corporates continue to take a cautious approach to spending.
- GPN's transformation initiatives, while beneficial, are causing some disruption in the business, particularly in the first half of 2025.
