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WEX's Q1 Earnings Miss Estimates Amid Coronavirus Crisis

Zacks Equity Research
·4 min read

WEX Inc. WEX reported mixed first-quarter 2020 results, with earnings missing the Zacks Consensus Estimate but revenues beating the same.

Adjusted earnings of $1.81 per share missed the Zacks Consensus estimate by 11.7% and increased 5.2% year over year. The reported figure came in below the company’s guidance of $2.15-$2.25. Total revenues of $431.7 million surpassed the consensus mark by 1.3% and increased 13% year over year. Revenues, however, fell short of management’s guidance of $445-$455 million.

All the segments of the company registered year-over-year revenue growth on market-share expansion and recent acquisitions.

In response to the coronavirus crisis, WEX’s counter actions included pay cuts for the board and executive officers, re-scaling headcount worldwide and implementation of a company-wide work-from-home policy.

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Notably, WEX’s shares have declined 36.3% over the past year compared with 8.5% growth of the industry it belongs to.

 

Revenues by Segment

Fleet Solutions revenues (58% of total revenues) increased 7.3% year over year to $249.8 million. This upside was driven by solid finance fee revenues and payment processing revenues related to two major North America portfolios.

Average number of vehicles serviced was 15.1 million, up 15% from the year-ago quarter’s figure. Total fuel transactions processed increased 7% from the year-ago quarter’s tally to 150.7 million. Payment processing transactions rose 5% to 121.6 million. U.S. retail fuel price declined 3.7% to $2.57 per gallon.

Travel and Corporate Solutions revenues (20%) of $84.4 million were up 3.3% year over year. The uptick can be attributed to strength in the corporate payments business owing to the ongoing transition to virtual payments and increasing usage of accounts payable products. The coronavirus pandemic’s adverse impact on travel volumes strained the segment’s revenues. Purchase volume decreased 4% to $8.0 billion.

Health and Employee Benefit Solutions revenues (22%) of $97.5 million jumped 44.5%, year over year, on 48% growth in U.S. healthcare business and contributions from the acquisition of Discovery Benefits. The average number of Software-as-a-Service (SaaS) accounts in the United States climbed 14% year over year to 14.5 million.

Operating Results

Adjusted operating income increased 7.1% from the prior-year quarter’s figure to $139.4 million. Adjusted operating income margin decreased to 32.3% from the year-ago quarter’s 34.1%.

Balance Sheet

WEX exited the first quarter with cash and cash equivalents of $861.2 million compared with the $810.9 million witnessed at the end of the prior quarter. Long-term debt was $2.7 billion, nearly flat year over year.

Currently, WEX carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance of Other Business Services Companies

S&P Global Inc. SPGI reported first-quarter 2020 adjusted earnings per share of $2.73, which beat the consensus mark by 15.7% and improved 29.4% year over year on revenue growth, benefits of productivity initiatives and reduced business travel. The stock carries a Zacks Rank #3 (Hold), at present.

IQVIA Holdings Inc. IQV delivered first-quarter 2020 adjusted earnings per share of $1.50, which outpaced the consensus mark by 1.4% but decreased 1.9% on a year-over-year basis. The reported figure was within the guided range of $1.46-$1.51. The stock currently carries a Zacks Rank of 3.

Insperity, Inc. NSP came up with first-quarter 2020 adjusted earnings of $1.70 per share, which surpassed the consensus mark by 5.6% but decreased 14.1% year over year. The reported figure matched the higher-end of the guided range of $1.61-$1.70. Currently, the stock carries a Zacks Rank #3.

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