Goldman Sachs Downgrades Total System Services (TSS) to Sell

July 8, 2013 7:14 AM EDT Send to a Friend
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Price: $30.48 -0.29%

Rating Summary:
    10 Buy, 9 Hold, 1 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 29 | Down: 28 | New: 24
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Goldman Sachs downgraded Total System Services (NYSE: TSS) from Neutral to Sell with a price target of $24 on sluggish organic, near-term NTSP risks and relative valuation.

The firm says shares will underperform the peer group (EVTC, GPN, HPY and VNTV) in the near term, given: "First, we expect challenging trends in the company's North America Services and Merchant Services to pressure organic results. We lower our organic growth expectations for both segments by about 2% in 2013/2014. Second, though our forecast assumes that the NTSP acquisition will be accretive by 2014, we see near-term risks to potential revenue synergies from the deal given our cautious view on pricing and competition in prepaid. We came away incrementally cautious on the acquisition following our recent Atlanta Financial Technology Bus Trip, where several private payments companies we met questioned potential revenue synergies given conflicts of interest with issuing bank clients and higher exposure to regulatory risk. Third, we see less room for significant incremental buybacks given the leverage taken on to close the NTSP deal (debt/EBITDA of 2.6X vs. target of 2X)."

The firm adjusted 2013-2015 operating EPS forecast to $1.36/$1.61/$1.85 from $1.42/$1.61/$1.78.

For an analyst ratings summary and ratings history on Total System Services click here. For more ratings news on Total System Services click here.

Shares of Total System Services closed at $24.78 yesterday.


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