August 9, 2017
Vantiv Inc. (VNTV) is making headlines this morning after some big merger news and a strong earnings report. While the stock opened lower on Wednesday, it's rebounding into positive territory as I write this. What's all the fuss with Vantiv Inc.? Is the stock still a buy? Let's find out, in today's blog.
Vantiv Inc. provides payment processing services. The company has two main segments, Merchant Services and Financial Institution Services. The Merchant Services segment offers merchant acquiring and payment processing services. The Financial Institution Services provides financial institutions with card issuer processing, payment network processing, fraud protection and much more. Headquartered in Cincinnati, Ohio, Vantiv Inc. has only offered these services in the United States...until today.
Today's big news is that Vantiv Inc. has made a formal offer to buy Worldpay for 8 billion pounds ($10.4 billion). Based in London, Worldpay processes over 31 million transactions per day, including card payments, multi-currency processing and online payments. Most importantly, Worldpay has an impressive global footprint. The company supports 400,000 merchants across 146 countries, including the U.K., where it leads the payments business.
Together, the combined company would be valued at $28.8 billion, making it one of the world's largest payments players. After the merger, Vantiv's current headquarters in Cincinnati will become the company's corporate headquarters, and Worldpay's headquarters in London will become the company's international headquarters. The deal is expected to result in cost savings of about $200 million per year. The companies are also looking for this deal to close in early 2018.
Now, the reason Vantiv's share price pulled back a little after this announcement is likely because Vantiv's offer price for Worldpay represents a 23% premium over Worldpay's closing price before the deal was announced. However, it isn't uncommon for there to be a little profit taking once such a deal is struck. So, here's why I believe VNTV is still an excellent buy at current prices.
This morning, Vantiv Inc. also released its second-quarter results. Net revenue rose 10% year-on-year to $530.0 million. Analysts were expecting only $525.1 million in revenue. So, Vantiv posted a 1.0% sales surprise. Over the same period, earnings jumped 11% to $0.42 per share. Excluding special items, adjusted earnings per share was $0.83. This beat the consensus estimate by a penny, or by 1.2%.
Finally, Vantiv Inc. revealed its full-year outlook. The company is targeting net revenue between $2.1 and $2.12 billion, or between 10% and 11% annual sales growth. Vantiv Inc. also expects adjusted earnings per share to range between $3.31 and $3.36, or between 21.2% and 23.1% annual earnings growth. This is above the Street view of $3.27 EPS on $2.11 billion in revenue.
With such strong sales and earnings prospects, I see further upside potential for Vantiv Inc. from here. In fact, with a solid B-rating in Portfolio Grader, Vantiv Inc. remains a Buy in my members-only Blue Chip Growthservice as well.
But even if you're not ready to join Blue Chip Growth right now, please stay tuned to this daily blog to discover even more market leaders as we continue separating the wheat from the chaff during this earnings season.