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Total System (TSS) View Up on Q2 Earnings Beat, Hikes Divided

Total System Services, Inc’s TSS second-quarter 2017 earnings per share of 82 cents surpassed the Zacks Consensus Estimate by 7.9% and grew 16.4% year over year.

Revenues of $1.2 million also beat the Zacks Consensus Estimate of $1.2 million, up 6.1% year over year.

Total expenses of $1.02 million increased 1.3% year over year.

Total System Services, Inc. Price, Consensus and EPS Surprise

 

Total System Services, Inc. Price, Consensus and EPS Surprise | Total System Services, Inc. Quote

Segments Results

Issuer Solutions

Net revenue for this segment increased 3.9% year over year to $392.76 million. Total transaction for this segment was $5.34 million in the reported quarter, up 7.1% year over year.

Operating income of $147.2 million for the segment was up 14.6% year over year. Operating margin of 37.5% increased from 34% in the year-ago quarter.

Merchant Services

Net revenue increased significantly year over year to $278.5 million from $261.4 million in the year-ago quarter. Dollar sales volume for this segment grew significantly year over year to $31.12 million from $28.56 million in the year-ago quarter.

Operating income advanced 13.4% year over year to $101.9 million. Operating margin surged to 36.6% from 34.4% in the year-ago quarter.

Net Spend
    
Net revenue increased 12.6% year over year to $183 million in the reported quarter. Gross dollar volume for this segment was $7.60 million, up 15% year over year. The company renewed its agreement with Dollar General for four more years.

Operating income grew 8.4% year over year to $46 million. Operating margin decreased to 25.2% from 26.1% in the prior-year quarter.

The company’s revised expectation for 2017 for net revenue growth in the band of 9–12%.
 
Financial Update

Total assets decreased slightly to $6.27 million as of Jun 30, 2017 from $6.37 billion at year-end 2016. Total shareholder’s equity climbed to $2.26 billion on Jun 30, 2017 from $2.09 billion at the end of 2016.

Long-term debt was $2.6 billion as of quarter end, down from $3.3 billion at 2016-year end.

Free cash flow totaled $335.2 million in the first half of 2017 compared with $257.3 million in the year-ago period.

Dividend Update

The board of directors approved 30% hike to quarterly dividend. The new dividend of 13 cents per share will be paid on Oct 2, 2017 to shareholders of record on Sep 21, 2017.

2017 Guidance Up

It now expects total revenue on a GAAP basis in the range of $4.80–$4.88 million (previous expectation $4.77–$4.87 billion) reflecting an increase of 15–17%. On a non-GAAP basis, net revenue is anticipated in the range of $3.31–$3.39 million (previous expectation $3.295–$3.395 billion) reflecting a rise of 9–12%.

GAAP EPS is projected in the range of $2.30–$2.38 (previous expectation $2.25–$2.32) representing a rise of 33–37%. Adjusted EPS attributable to the company’s common shareholders is estimated in the range of $3.22–$3.30 (previous expectation $3.16-$3.26) reflecting an increase of about 15–18%.

Zacks Rank

Total System Services currently carries a Zacks Rank #2 (Buy). You can see https://www.zacks.com/stocks/buy-list/?ADID=zp_1link&ICI... _1link">the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Players

American Express Co. AXP, Visa Inc. V and Alliance Data Systems Corp ADS from the same space also came up with flying colors, with bottom lines beating their respective Zacks Consensus Estimate in the last reported quarter.

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