Business services provider Global Payments Inc. (GPN - Free Report) continued its earnings momentum in second-quarter fiscal 2017 (ended Nov 30, 2016) with a healthy year-over-year improvement in revenues and adjusted earnings. GAAP earnings for the reported quarter were $49.5 million or 32 cents per share compared with $78.8 million or 60 cents per share in the year-ago quarter. Despite a healthy year-over-year increase in revenues, GAAP earnings declined due to high operating expenses in the reported quarter.

Adjusted earnings improved significantly to $136.6 million or 89 cents per share from $99.5 million or 76 cents per share in the year-earlier quarter on higher organic growth across key markets. Adjusted earnings for the reported quarter comfortably beat the Zacks Consensus Estimate by 9 cents.

Global Payments has successfully beat earnings in the trailing four quarters for an average beat of 9.21%. The company has even outperformed the Zacks categorized Financial Transaction Services industry in the last three months with an average return of 9.8% compared with 3.5% for the latter.

The company’s share price was up from $74.45 to $79.79 post earnings release as of Jan 9, 2016.

Revenues

Adjusted net sales increased 58% year over year to $817.2 million and were ahead of the Zacks Consensus Estimate of $802 million. The year-over-year increase in revenues was primarily driven by solid performance in integrated payments businesses, OpenEdge, Ezidebit, and software-led solutions at Heartland Commerce and Campus Solutions. The company also reported double digit organic growth across key markets, including U.S. direct business and across most of Europe and Asia Pacific.

By geographic segments, non-GAAP revenues in North America increased 85.4% to $604.1 million, while improving 5.8% and 23.8% to $147.5 million and $65.6 million in Europe and Asia Pacific, respectively.

Margins

Adjusted operating income increased to $240.8 million from $153.2 million in the year-ago quarter. Adjusted operating margin was 29.5%, while that on constant currency basis was 30.0%.

Other Financial Details

At the quarter end, Global Payments had cash and cash equivalents of $995.8 million with long-term debt of $4,316.4 million. Cash from operating activities for the first six months of fiscal 2017 was $193.5 million. The company increased its existing share repurchase program authorization to $300 million and approved a quarterly dividend of a penny per share.

Global Payments Inc. Price, Consensus and EPS Surprise

Global Payments Inc. Price, Consensus and EPS Surprise | Global Payments Inc. Quote

Raised Guidance

For calendar year 2017, Global Payments increased its adjusted earnings per share guidance to $3.70–$3.90 from $3.45–$3.55, representing 16% to 23% year-over-year growth. It expects adjusted revenues to be in the range of $3.35–$3.45 billion, up from $3.2–$3.3 billion expected earlier, reflecting a year-over-year increase of 18% to 21%.

Currently, Global Payments carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Paysafe Group Plc (NVAFF - Free Report), Vantiv, Inc. (VNTV - Free Report) and FactSet Research Systems Inc. (FDS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Paysafe Group is currently trading at a forward P/E of 9.3x.

Vantiv has long-term earnings growth expectation of 14.5% and has beaten estimates in each of the trailing four quarters with an average positive earnings surprise of 4.5%.

FactSet Research Systems has long-term earnings growth expectation of 10.7% and has beaten estimates thrice in the trailing four quarters for an average earnings surprise of 1.9%.

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