Euronet Beats EPS, Misses Top Line

Euronet Worldwide Inc. ( EEFT - Snapshot Report ) reported second quarter earnings of 39 cents per share, beating the Zacks Consensus Estimate of 32 cents and 35 cents earned in the year-ago quarter. Earnings of $20.2 million in the reported quarter was 9.8% more than $18.4 million recorded in the second quarter of 2011.

Including foreign exchange loss, intangible asset amortization, share-based compensation, non-cash 3.5% convertible debt accretion interest and non-cash GAAP tax expense the company reported a net income of $5.7 million or 11 cents per share compared to $11.9 million or 23 cents in the prior-year quarter.

Operational Update

During the quarter under review, total revenue of Euronet Worldwide grossed $302.4 million, climbing 8% from $279.8 million in the year-ago quarter, but a tad below the Zacks Consensus Estimate of $303 million.

Total operating expenses for the second quarter amounted to $282.5 million; increasing 8.2% from the prior-year quarter primarily due to increase in operating costs, salaries and benefit related expenditure.

Total operating income amounted to $19.9 million increasing 5.9% over the year-ago quarter.

Total transactions for the company increased 13% to 570 million, considering contributions from all its segments.

Segment Details

The EFT Processing Segment reported total revenue of $58.3 million increasing 14.8% over the prior-year quarter. Its operating income increased 12% to $10.3 million during the second quarter.

The improved performance came on the back of an extensive ATM network in Europe and India, together with the purchase of 51% of the outstanding shares of the Euronet Middle East (ENME) joint venture in the previous quarter. This segment recorded a total transaction of 291 million against 233 million in the year-ago quarter.

The ePay Segment reported total revenue of $166.7 million increasing 7% over the prior-year quarter. The increase in revenue was primarily due to the acquisition of cadooz in the penultimate quarter of 2011, partially offset by the change in mobile operator strategy in Brazil and mobile operators going direct with retailers in Australia in the previous year.

Operating income plunged 25% to $10.1 million during the second quarter. Strong performance in Germany and the U.S. was more than offset by weak results from Brazil, Australia and Spain. Total transactions amounted to 272 million, increasing marginally by 3% over the prior-year quarter.

The Money Transfer Segment’s total revenue improved 6% over the prior year-ago quarter to equal $77.5 million in the quarter under review. Operating income surged 34% to $6.7 million during the reported quarter. An increase of 21% in total transactions contributed to the expansion of revenue and operating income. The total transactions surged 21% over the last-year quarter to 7.4 million in the second quarter.

The company’s Corporate and Other reported total expenses of $7.2 million in the reported quarter. The decrease of 19.1% was attributable to lower short-term incentive and stock-based compensation accruals based on the company’s performance.

Financial Position

Euronet Worldwide exited the second quarter with cash and cash equivalents of $178.6 million. The decline from $180.7 million at prior-quarter end was primarily due to shedding off of debt obligations, incurring higher capital expenditure and higher tax amount. However, healthy cash from operations were a partial offset.

Total debt obligation in the company’s books amounted to $140.8 million decreasing from $161.7 million as on December 31, 2011.

Guidance

With the assumption of a constant foreign currency rate remaining stable, the company guided the upcoming third quarter cash earnings to be around 41 cents per share.

Peer Take

The company competes closely with The Western Union Company ( WU - Analyst Report ) , which reported second quarter operating earnings of 46 cents per share, up 2.2% year over year and 3 cents ahead of the Zacks Consensus Estimate.

Western Union’s revenues for the quarter were $1.4 billion, up 4% year over year but down 1.5% from the Zacks Consensus Estimate. The year-over-year upside in revenue was attributable to a 26% surge in foreign exchange revenues and a 3% increase in other revenues.

Zacks Rank

Euronet Worldwide carries a Zacks #4 Rank, implying a short-term Sell rating and its peer Western Union retains a quantitative Zacks #3 Rank that translates into a short-term Hold rating.