Total System (TSS) Q3 Earnings, Revenues Miss Estimates
Total System Services, Inc.’s TSS third-quarter 2016 operating earnings per share (EPS) of 66 cents missed the Zacks Consensus Estimate of 67 cents.Including the adverse impact of currency and severance expenses of approximately 6 cents, adjusted EPS came in at 71 cents. This reflects a decrease of 8.7% from the prior-year earnings of 78 cents per share. The downside mainly stemmed from a substantial year-over-year increase in expenses.Total revenue of $1.1 billion missed the Zacks Consensus Estimate of $1.16 billion. Nonetheless, the top line surged 62% year over year due to outstanding performance by its Merchant Services segment.Total System reported a year-over-year increase of 82% in total expenses to $991.6 million. A rise of 84.1% in cost of services and a 71.3% increase in selling, general and administrative expenses escalated total expenses.Segments Results
North AmericaServices
Net revenue inched up 2.4% year over year to $300 million in North America. The top-line growth in the region was backed by job gains in the U.S. and overall improvement in consumer spending during the quarter Total transaction for this segment was $4.4 billion in the third quarter.
Operating income of $113 million for the segment slipped 0.5% year over year. Operating margin declined by 110 basis points (bps) year over year to 37.3%
International Services
For this segment, net revenue decreased 8.1% year over year to $79.4 million. The segment recorded total transactions of $699 million in the third quarter.
Operating income plunged 15.5% year over year to $15.5 million. Operating margin declined by 180 bps year over year to 19.5%
Merchant Services
Net revenues soared 112% year over year to $262.5 million. Point-of-sales transactions increased 5.4% to $1.2 billion. Dollar sales volume for this segment soared nearly 140% year over year to $28.6 billion.
Operating income surged 114% year over year to $90.8 million. Operating margin improved 30 bps year over year to 34.6%
NetSpend
Net revenue jumped 11.2% year over year to $155 million. Gross dollar volume for this segment was $6.4 billion in the third quarter, up 18% year over year.
Operating income grew by 9.5% year over year to $40.8 million. Operating margin declined by 40 bps year over year to 26.3%.
Financial Update
Total assets increased 64% to $6.37 billion as of Sep 30, 2016 from $3.88 billion at year-end 2015. Total equity climbed 12% to $2.06 billion as of Sep 30, 2016 from $1.84 billion at the end of 2015.
Cash from operations was $550 million as against $460 million in third-quarter 2015. Free cash flow totaled $443.6 million as of Sep 30, 2016 compared with $324.4 million in the year-ago quarter.
2016 Guidance
Total System has adjusted its financial guidance for full-year of 2016 to account for currency headwinds. Nonetheless, the company reiterated its adjusted EPS projection.Earlier, management had increased total revenue estimates for 2016 to $4.17 billion from $4.15 billion. Net revenue projection for the full year has been raised to $3.04 billion from $3.03 billion.
Adjusted EPS attributable to the company’s common shareholders from continuing operations has been revised to $2.85 from $2.78 guided earlier.
TOTAL SYS SVC Price, Consensus and EPS Surprise
TOTAL SYS SVC Price, Consensus and EPS Surprise | TOTAL SYS SVC Quote
Zacks Rank and Stocks to Consider
Total System presently carries Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among the other players from the finance sector that have reported their earnings so far, the bottom line at Alliance Data Systems Corporation ADS, Progressive Corp PGR and American Express Company AXP comfortably beat their respective Zacks Consensus Estimate.
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