Oct. 29--Heavy trading a day after company reports 14 percent drop in 3rd quarter earnings

By TONY ADAMS

tadams@ledger-enquirer.com

Shares of TSYS stock were roughed up Wednesday, a day after the credit-card processor reported a 14 percent drop in third-quarter earnings, but also said it has more business in the pipeline.

Shares plunged nearly 11 percent out of the gate, dropping from Tuesday's close of $16.55 to $14.76 before recovering somewhat through the day as the overall market slumped because of a national report on declining new home sales in the U.S.

TSYS shares (Ticker: TSS) closed down $1.10, or 6.65 percent, at $15.45. Trading was heavy, with 4 million shares changing hands, nearly four times normal volume.

TSYS spokesman Cyle Mims declined to comment on the movement of the firm's stock price.

Investors apparently were unsettled by the company's prospects amid a recession that has spooked consumers and impacted spending habits.

"I hear just what you hear -- the recession's over. But I don't believe that the consumer believes it," Phil Tomlinson, TSYS chairman and chief executive officer, said Tuesday during a conference call with Wall Street analysts.

TSYS, headquartered in Columbus with about 4,400 on its payroll locally, reported net income of $55.3 million, or 29 cents per share, in the third quarter. That's off 14 percent from $64.4 million, or 32 cents per share, in the same period a year ago.

The company did report that it has 21 letters of intent from potential clients, but none yet finalized.

At the same time, card accounts on file -- one measure of TSYS' growth -- are down from 355 million a year ago to 342 million today.

The potential for growth at TSYS is conflicting with analysts' concern over the economy and its future impact on the card processor's financial results.

"A solid pipeline and strong merchant acquiring growth are positives, but with a weak consumer and cautious issuers, we remain on the sidelines," Credit Suisse analyst Bryan Keane wrote in a research report.

Still, Credit Suisse said it is raising its target price for TSYS shares from $14 to $16 because its peer firms are now trading higher, along with slightly improving credit-card transaction data.

TSYS, which performs electronic transactions, is paid by banks, retailers and credit-card issuers each time a consumer uses their plastic for a purchase, regardless of the amount charged.

"We have seen indications of slight improvement," Tomlinson said Tuesday. "But I don't think this industry is out of the woods, as you can tell. We've have some pretty strong headwinds, and I really think we will until the consumer returns."

The CEO said its processing clients are trying to reinvent themselves and develop new strategies amid a weak economy and new federal credit-card regulations that will be implemented in coming months.

"I think there are a lot of banks out there ... that are really struggling for every penny," he said. "It's just a tough time for issuers."

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