Global Payments (NYSE: GPN) felt good about
being a middleman yesterday: The card transaction processor
destroyed analyst estimates.
During its fiscal first quarter, Global's net sales grew
8.8% from the year-ago quarter, to $441 million, on strength
in its international merchant services business. Revenue
generated overseas was up 28.7% from last year's quarter, and
operating margins also improved in that segment. However, the
rest of the business had a lackluster performance, and net
income rose just 0.5%, to $57.8 million, leaving earnings per
share flat at $0.71.
Drop it already
If Global wants to make big improvements going forward,
there are a number of steps it should take. First things
first: Global's money transfer business adds little to the
company, and it should be sold. Perhaps a competitor such as
Western Union (NYSE: WU) would like to
solidify its foothold in that industry. The money transfer
business contributes only marginally to Global's total
revenue, and it often serves only to hamper sales growth. As
I see it, as long as Global keeps its money transfer
business, it won't be firing on all cylinders.
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Global might also get tips on improving its business by
looking at how its international segment appears to be more
efficient than its North American operations. Compare their
respective operating margins:
Operating Margin, by Segment
Q1 2010
Q1 2009
North America Merchant Services
25.0%
29.0%
International Merchant Services
27.1%
24.8%
Money Transfer
10.8% Continued... |