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Global Payments Down on Inline Results


Associated PressAll Associated Press News

NEW YORK (AP) - Shares of Global Payments Inc. plunged Friday after the company broke a four-year streak of beating Wall Street's profit forecasts.

The Atlanta-based electronic payments processor early Friday posted fiscal second-quarter profit of 44 cents per share, excluding charges, thereby merely meeting analysts' forecasts.

While maintaining profit guidance for the rest of the year, the company lowered the top end of revenue guidance because competition is making it cheaper for customers to wire money abroad.

"Based on our first-half results and our second-half expectations, we are reaffirming the low end of our annual fiscal 2007 revenue guidance of $1.06 billion, and reducing the high end of this guidance to $1.07 billion," said Chief Executive Paul R. Garcia. "This revenue guidance reflects an expected 16-percent to 18-percent growth versus $908 million in fiscal 2006."

The stock fell $6.65, or 13.6 percent, to $42.40 in midday trading on the New York Stock Exchange. Analysts said investors had grown accustomed to Global Payments beating analysts' expectations and had hoped it would surpass estimates again.

Global Payments credited profit growth to the merchant services segment, which enables vendors to process credit card and check payments. However, the company said much of this growth stemmed from a favorable exchange rate with the Canadian dollar, which is not likely to last.

Global Payments also said competition led to lower prices in the money transfer business, which helps customers send money to other countries.

"The U.S.-to-Mexico corridor is becoming increasingly more price competitive," Garcia said, referring to immigrants in the U.S. wiring money to Mexico.

Garcia said three factors are hurting the sector. Many competitors trying to sell themselves are dropping prices to boost their transaction volume, a key factor buyers consider in valuing a wire-transfer business. Also, some U.S. politicians threaten tougher immigration laws, which makes some illegal immigrants afraid to wire money. And, an improving Mexican economy is creating better jobs in Mexico.

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