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Euronet Worldwide (EEFT) Up 11.2% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Euronet Worldwide (EEFT). Shares have added about 11.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Euronet Worldwide due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Euronet's Q3 Earnings Beat, Revenues Miss Estimates

Euronet Worldwide delivered third-quarter 2019 earnings of $2.84 per share, beating the Zacks Consensus Estimate by 1.4%.

Moreover, the bottom line improved 31.5% year over year.  This upside can mainly be attributed to higher revenue contribution by all segments.  

The company’s reported net income also surged 30.2% to $2.46 earnings per share in the quarter under review.

Further, its total revenues were $787 million, up 10.1% from the year-ago quarter. Meanwhile, the top line missed the Zacks Consensus Estimate by 4%.

Euronet’s total transactions were 1.23 million, having increased 21% year over year.

Additionally, operating income rose nearly 29% to $194 million in the quarter under review.

EFT Processing Segment’s total revenues grew 21% (26% in constant currency) year over year to $261.7 million on the back of higher transactions and a rise in operated ATMs. Adjusted EBITDA amounted to $168.9 million, up 33% (38% at cc) from the year-ago period. Operating income for the segment was $150.9 million, up 37% year over year (up 42% on constant currency basis).

The epay Segment’s total revenues increased 3% year over year (7% up on constant currency basis). Adjusted EBITDA amounted to $21.7 million, up 19% improvement from the year-earlier figure (23% up on constant currency basis). Operating income stands at $20.1 million, up 23% year over year (27% on constant currency basis). This segment reported transactions of 389 million, up 40% year over year.

The Money Transfer Segment’s total revenues climbed 5% (7% at cc) year over year to $280.8 million, backed by 5% higher transactions. Adjusted EBITDA amounted to $43.7 million, reflecting a 4% improvement (6% increase at cc) from the prior-year quarter. Operating income for this segment totaled $35.6 million, up 6% in constant currency. This segment reported total transactions of 29.3 million, up 5% year over year.

Corporate and other Segment incurred an expense of $12.6 million in the reported quarter, up 24% year over year.

Q4 Guidance

Euronet expects adjusted earnings per share for the fourth quarter to be nearly $1.61 (assuming forex to be stable).

Financial Update

Total assets at third-quarter end were $4.3 billion, up 30% from the level at 2018 end.

Cash and cash equivalents improved nearly 64.2% to $1.7 billion from the figure at 2018 end.

The company’s total indebtedness declined 21.4% to $1.1 billion year over year. This decrease was owing to the impact of favorable foreign currency translation on its Euro-dominated debt.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

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VGM Scores

At this time, Euronet Worldwide has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Euronet Worldwide has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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