Zacks Industry Rank Analysis is written by John Blank, PhD, Chief Equity Strategist, Zacks.com.
Financial Transactions Flow Rises
With a rise in jobs, more people have climbed back into the labor force raft with enthusiasm. It is time to promote positive news about the financial transactions services industry. Forthcoming earnings reports, or at least better revenue guidance about a faster transaction flow across summer and fall, could inspire quite a few well-deserved nods of accomplishment.
The Financial Transactions Services sector in the Zacks Industry Rank list gained 109 positions last week. This large category of 18 companies now holds a rank of #38 out of 265 industries. Positive earnings revisions outpaced negative revisions by 11 to 6. Financial Transaction Services quarterly reports as an industry group also averaged positive Earnings per Share (EPS) surprises of +16%.
There are a number of broad factors affecting this turnaround: the end of a bad winter, more job security, increased consumer spending online, fewer defaults, increased scope and ability in service lines -- and the simple fact people are just buying more this year compared to last. Combined, this means good news for an industry which can leverage a direct link to topline growth in the U.S. and global economy.
Pay attention to overall sector performance. Any swift industry current affects not only individual businesses but the industry as a whole. The wider and faster goes the transactions river, the more beneficial it is to any successful investment strategy. This industry seems to have the right discretionary consumer focus, a sweet spot inside any transactions-driven revenue stream.
Rising flows of stock market-driven economic expansion in wealthy countries can give investors a first-class ferry ride to soaring profits. Just beware the logjams of a stock market correction, which might tamp down retail spending across the board and lead the card transactions river to find a lower level.
Two companies stood out this week. They can swiftly turn card transactions trends to revenue. Upgrades to a Zacks Rank #1 (Strong Buy) rating, or to a Zacks Rank #2 (Buy) rating, typically foreshadow a positive performance for the related stocks, as a response to even further positive earnings estimate revisions.
GPN was upgraded to a Zacks Rank #2 (Buy) last week from a #3 (Neutral). It reported earnings on April 3, 2014.
Global Payments Inc. is a leading provider of electronic transaction processing services for consumers, merchants, Independent Sales Organizations, financial institutions, government agencies and multi-national corporations located throughout the U.S., Canada, Latin America and Europe.
Global Payments offers a comprehensive line of processing solutions for credit and debit cards, business-to-business purchasing cards, gift cards, electronic check conversion and check guarantee, verification and recovery, as well as terminal management. The company also provides consumer money transfer services from the U.S. and Europe to destinations in Latin America, Morocco and the Philippines.
FISV was upgraded to a Zacks Rank #2 (Buy) last week from a #3 (Neutral). This company reports quarterly earnings on April 29, 2014.
Fiserv's strong foothold in the financial and payment solutions business is supported by its broad customer base, a diversified product portfolio and continuous IT upgrades. After a dismal quarterly report in February, this trifecta can be expected to boost the company's coming guidance in April.
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