Global Payments will release its quarterly report on Tuesday, and the payment-processing company has seen its shares sustain their high price level and approach all-time highs lately. Yet the merchant processor faces some big competitive pressures from innovators in the industry, including eBay's PayPal division and the privately held Square, both of which threaten Global Payments' earnings by making the intermediary unnecessary.
Global Payments has made huge profits in past years from acting as a go-between connecting merchants who accept credit cards and the network companies that make those cards possible, most notably Visa and MasterCard . As new technology like mobile payments starts to develop and become more prevalent, though, it's unclear whether Global Payments will continue to have a place in the industry's framework. Let's take an early look at what's been happening with Global Payments over the past quarter and what we're likely to see in its report.
Stats on Global Payments
Analyst EPS Estimate
Change From Year-Ago EPS
Change From Year-Ago Revenue
Earnings Beats in Past 4 Quarters
Source: Yahoo! Finance.
Can Global Payments earnings pay off this quarter?
Analysts have cut their views on Global Payments earnings in recent months, reducing their estimates by $0.07 per share for the quarter that ended in August and their full-year fiscal 2014 projections by nearly double that amount. The stock has done reasonably well, though, posting a nearly 10% rise since late June.
Global Payments actually started out the quarter on a negative note, as it announced discouraging results for its previous quarter. Although the company's profits jumped eightfold on a 3.6% rise in revenue, most of Global Payments gains came because of a huge hit to earnings in the year-ago quarter the company sustained from a security breach. Those results also fell short of expectations, and poor guidance for the remainder of the fiscal year weighed heavily on the stock.
Those results could reflect the emerging acceptance of alternatives to traditional merchant services. eBay's PayPal offers simple payment-acceptance programs that in many cases have lower costs, and both PayPal and competitors like Square have made partnerships with retail establishments to accept payments directly through their networks rather than going through merchant processors. Meanwhile, as Visa and MasterCard explore ways to take advantage of mobile-payment systems, they'll inevitably seek to keep more of the profits that currently go to Global Payments.
Still, Global Payments has looked for new avenues for growth. Last month, the company's greater giving division made an arrangement with social-media fundraising company Chirpify that will allow donors to make charitable gifts simply by replying to posts on social-media programs like Twitter and Instagram. Bridging the gap between the social world and traditional payment processing could help Global Payments hold its own against PayPal and efforts from Visa, MasterCard, and other card network companies.
In the Global Payments earnings report, watch to see how the company responds to news yesterday that eBay bought mobile-payments processor Braintree. The $800 million transaction will give PayPal a big leg up in the mobile space while also gaining a lucrative customer base. Global Payments will have to work hard to sustain its place in the rapidly evolving industry.
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The article Should You Expect Growth From Global Payments Earnings? originally appeared on Fool.com.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends eBay, MasterCard, and Visa. The Motley Fool owns shares of eBay, MasterCard, and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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