We are initiating coverage on Total System Services (TSS) with an Underperform recommendation. The company’s fourth quarter earnings came in a penny ahead of the Zacks Consensus Estimate. However, results posed weak top-line growth due to sluggish performance in the electronic payment processing services.

Inefficient cost-cutting and negative growth guidance for 2010 were also among the negatives. Although management expects to grow inorganically with a modest cash position and a risk-free balance sheet, the company is adequately exposed to competition, currency fluctuation and interest risk.

Moreover, poor credit markets and weakness in the credit card industry has led to a decline in the number of client accounts and long-term contracts. Hence, we do not foresee any substantial development strategy to drive earnings growth in the near term.Zacks Investment Research