Payments Companies Get off to a Strong Start on Wall Street in 2019

Publicly-traded payments companies once again have rewarded their investors, with a basket of shares from 29 firms posting a mean, or average, return of 23.6% in the first quarter to handily beat three major market indexes, according to Chicago-based Barrington Research Associates Inc.

The market is rebounding in 2019, with the Nasdaq Composite Index up 16.5% in the first quarter, the Standard & Poor’s 500 Index up 13.1%, and the Dow Jones Industrial Average up 11.2%, Barrington Research reported Tuesday. Payments companies handily reversed their negative 21% mean return in 2018’s fourth quarter—a rare period in which they trailed the major indexes even though all three also were in negative territory.

Part of the payments lift came from the strong fourth-quarter earnings reports many companies issued  early this year, Gary Prestopino, Barrington Research managing director, tells Digital Transactions News by email.

“The Q4/18 earnings season was very positive for the group, with 19 companies exceeding consensus [analyst] expectations, six meeting expectations, and three missing their numbers,” Prestopino wrote in a report.

Share prices of smaller payments companies’ tend to be more volatile than those of  bigger ones, but leading processor First Data Corp.’s stock jumped 55.4% in the first quarter, the third-highest among the 29. The big increase came after Fiserv Inc. revealed its $22 billion buyout offer for First Data Jan. 16.

Another buyout target, Worldpay Inc., saw its shares rise 48.5%, good for fifth place. Worldpay’s stock had been advancing steadily through the quarter, but it jumped on March 18’s news that Fiserv arch-rival Fidelity National Information Services Inc. (FIS) had made a $43 billion stock-and-cash offer for the suburban Cincinnati-based processor.

The leading first-quarter gainer was Las Vegas-based Everi Holdings Inc., whose shares leaped 104.3%. Everi is a specialist in payment, ATM, and gaming services for the casino industry. Second place went to Payment Data Systems Inc., a small merchant processor and prepaid card services provider based in San Antonio, Texas, whose shares rose 57.8%.

In fourth place was Littleton, Colo.-based payment card manufacturer CPI Card Group Inc., which has struggled with heavy debt and net losses. But CPI’s shares rose 49.3% in the first quarter. “The stock got hammered in Q4,” says Prestopino. “The new management team is successfully turning things around, and generating sales growth and positive adjusted EBITDA [earnings before interest, taxes, depreciation and amortization].”

The three worst-performing payment stocks in the first quarter were Green Dot Corp., down 23.7%; Net 1 UEPS Technologies Inc., off 23.5%, and Evertec Inc., down 3.1%.

For the group, most of the first-quarter gains came in January and February since March’s overall mean return was 3.7%, better than the three indexes.