Global Payments: Look Beyond FX

Global Payments (GPN - commentary - Cramer's Take) just reported second quarter earnings per share of 60 cents, a 25% increase over second-quarter 2007, and $401.1 million in revenues, a 30% increase. These results fell short of analysts' estimates of 57 cents of earnings and $405 million in revenues.

However, investors should note the effect of currency losses on these results. On a constant currency basis, second-quarter earnings increased 39% with revenues up 37%. Global has a strong record of growth and is aggressively expanding its franchise. The company has posted four-year annual growth rates for revenues and earnings of 19% and 23%, respectively.

Well positioned to pilot the worldwide trend from paper to electronic transactions, Global is a leading consumer card payment and money transfer company. The company operates in two segments: merchant services and money transfer. Merchant services provides products such as check processing, payment processing and point-of-sales terminals to a diversified group of vertical markets, including healthcare, retail, government and utilities.

The money transfer business primarily consists of transferring funds for immigrant communities in the U.S. and Europe. Global has more than 40 years of payment processing experience and processes over $3.5 billion in transactions on an annual basis through more than 1 million merchants.

Global has benefitted from a number of trends: first and foremost, the growth of electronic and card-based transactions. With increased globalization, the use of card-based payments has grown sharply. In North America, there has also been movement from traditional financial institutions to independent providers as merchants seek more efficient distribution channels with better technology.

In addition, immigration trends have driven the demand for overseas money transfers from individuals. In recent years, Global also has made a number of strategic acquisitions and business expansions in future growth markets such as China, India and Russia.

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At the time of publication, Gear had no positions in the stocks mentioned.

Steve Gear was director of capital markets at Stockhouse.