JMP Downgrades First Data to 'Market Perform'

Analyst David Scharf cites earnings quality, and growth deterioration in Western Union's international business

JMP Securities downgraded First Data (FDC ) to market perform from outperform.

Analyst David Scharf says First Data, a transaction processing services firm, managed to post 51 cents recurring earnings per share on the back of a lower tax rate, lower share count, and more aggressive cost cutting, repeating the second-quarter's formula of worsening earnings per share quality. He says earnings per share quality and Western Union's international business continue to deteriorate; Western Union experienced another quarter of sequential declines in almost every growth metric, and says management guided down the outlook on international transaction growth.

Scharf thinks earnings leverage, growth opportunity, and the trading outlook will continue to hinge on whether there's a bottom in Western Union's growth. He's keeping the $1.91 2003 earnings per share and $2.20 2004 earnings per share estimates.

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