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TheStreet Open House

Why Heartland Payment Systems (HPY) Stock Is Up Today

NEW YORK (TheStreet) -- Heartland Payment Systems (HPY) was gaining 8.6% to $40.98 Wednesday after beating analysts' estimates for earnings in the first quarter.

For the first quarter the company reported earnings of 52 cents a share, beating the Capital IQ Consensus Estimate of 51 cents a share by 1 cent. Revenue grew 5.9% from the year-ago quarter to $155.5 million. Analysts expected revenue of $155.85 million for the quarter.

Looking to the full-year 2014 Heartland Payment Systems expects revenue to grow between 8% and 10% to between about $645 million and $660 million. The company expects earnings of between $2.37 and $2.41 for the year.

"We continue to deliver record earnings, notwithstanding the negative impact of the severe winter weather on the entire industry," chairman and CEO Robert O. Carr said in a press release. "The continued success of our new business initiatives produced all-time record new margin installed for the third consecutive quarter and our first ever $7 million month in March. The strong momentum of our sales efforts will begin to drive faster card processing volume and associated revenue growth as we move through the year."

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TheStreet Ratings team rates HEARTLAND PAYMENT SYSTEMS as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate HEARTLAND PAYMENT SYSTEMS (HPY) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 18.2%. Since the same quarter one year prior, revenues slightly increased by 6.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • HEARTLAND PAYMENT SYSTEMS has improved earnings per share by 24.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HEARTLAND PAYMENT SYSTEMS increased its bottom line by earning $1.98 versus $1.61 in the prior year. This year, the market expects an improvement in earnings ($2.39 versus $1.98).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the IT Services industry average, but is less than that of the S&P 500. The net income increased by 16.4% when compared to the same quarter one year prior, going from $14.95 million to $17.41 million.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 26.14% over the past year, a rise that has exceeded that of the S&P 500 Index. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • The current debt-to-equity ratio, 0.58, is low and is below the industry average, implying that there has been successful management of debt levels. Despite the fact that HPY's debt-to-equity ratio is low, the quick ratio, which is currently 0.70, displays a potential problem in covering short-term cash needs.
  • You can view the full analysis from the report here: HPY Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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