Eighteen analysts have increased their earnings forecasts for this payment processor in the past month, and the company beat last quarter’s estimates by nineteen cents. Zack’s also rates the company a “Buy”. Our second pick today is a sell recommendation for a chipmaker with slowing earnings.
Buy: Total System Service (TSS)
From Blue Chip Growth
We’ve had a lot of success with Equifax Inc. (EFX), so this month I’d like to add another high-quality credit services company to the Buy List. For the past 30 years, Total System Service (TSS) has been one of the world’s leading electronic payment processing companies. Total System Service works with banks and other financial institutions across the U.S., Canada, Mexico, China and much of Europe.
The company has four main divisions: North America Services, Merchant Services, NetSpend and International Services. Last year, these divisions accounted for 45%, 21%, 19% and 15% of company-wide sales, respectively. So while TSYS has a large international footprint, most of its business is domestic.
Last quarter, Total Systems’ sales rose 14.8% to $707.9 million, beating analysts’ expectations by 5.1%. Over the same period, earnings jumped 44.2% to $120.6 million, or $0.65 per share. Excluding special items, adjusted earnings were $0.78 per share. Analysts were expecting just $0.59 EPS, so TSYS posted a healthy 32.2% earnings surprise. Pleased with these results, the company raised its FY 2015 sales and earnings guidance. TSYS is now targeting 12% to 13% sales growth and 24% to 26% EPS growth. This is while the industry as a whole is expected to see just 16.5% bottom-line growth this year.
I must also mention that TSYS pays a modest dividend, with a 0.75% annual yield. If you’re looking for another solid financial services company to add, Total System Service is a great choice. Add this Conservative stock up to $59 per share.
Louis Navellier, Blue Chip Growth, www.bluechipgrowth.com, 800-718-8289, December 2015