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Why Is Euronet Worldwide (EEFT) Down 0.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Euronet Worldwide (EEFT - Free Report) . Shares have lost about 0.1% in that time frame, underperforming the S&P 500.

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

Euronet's Earnings and Revenues Improve Y/Y in Q2

Euronet’s second-quarter 2021 adjusted earnings of 35 cents per share missed the Zacks Consensus Estimate by 45.3%. The company reported a loss of 2 cents in the year-ago quarter.

Euronet gained from higher revenues and improved transactions, partly offset by steep expenses.

It reported a net income of 16 cents per share in the second quarter against the prior-year quarter’s net loss of $2.18.

Total revenues improved 35% year over year to $714.7 million in the quarter under review. The top line also outpaced the Zacks Consensus Estimate by 3.9%.

In the second quarter, adjusted operating income amounted to $30.1 million, which increased 812% year over year.

Total operating expenses increased 8.8% year over year to $684.6 million due to a rise in direct operating costs, salaries and benefits, and selling, general and administrative costs.

Segmental Results

The EFT Processing Segment’s total revenues of $113.5 million increased 45% (up 36% on a constant currency basis) year over year on the back of high transactions.

Adjusted EBITDA came in at a negative $3.1 million in the quarter while the same in the prior-year period was a negative $14.8 million. Operating loss of $25.3 million decreased 55% from the year-ago quarter’s operating loss of $56.6 million. This segment’s total transactions of 988 million rose 46% year over year in the second quarter.

The epay Segment’s total revenues of $243.9 million surged 30% year over year (up 21% on a constant currency basis), attributable to constant digital media content and mobile growth across specific markets. Adjusted EBITDA totaled $29.3 million, which soared 49% year over year (up 40% on a constant currency basis). Operating income amounted to $27.2 million, reflecting a year-over-year surge of 51% (up 42% on a constant currency basis).

Reported transactions advanced 35% year over year to 788 million in the quarter, attributable to customer growth across South America and Asia as well as continued strength in digital channel sales.

The Money Transfer Segment’s total revenues of $359.3 million rose 37% year over year (up 30% on a constant currency basis) in the quarter. The upside can be attributed to constant network expansion coupled with direct-to-consumer digital transactions witnessing growth, which resulted in improving U.S. outbound and international-originated money transfers.

However, it was partly offset by headwinds from U.S. domestic business.
Adjusted EBITDA was $53.2 million in the quarter under review, which climbed 48% year over year (up 37% on a constant currency basis).

Operating income totaled $44 million against the year-ago quarter’s operating loss of $55.2 million. This segment’s total transactions rose 33% year over year to 34.2 million in the second quarter.

Corporate and Other reported an expense of $15.8 million for the quarter, which increased 110.7% year over year, primarily due to a rise in corporate costs from higher long and short-term compensation expense.

Financial Update (as of Jun 30, 2021)

Total assets of $4.4 billion dropped 9.9% from the level at 2020 end.

Cash and cash equivalents of $994.5 million at the end of the second quarter fell 30% from the 2020-end level.

Debt obligations, net of current portion, declined 18.2% from the level as of Dec 31, 2020 to $1.1 billion in the quarter under review.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -21.17% due to these changes.

VGM Scores

Currently, Euronet Worldwide has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Euronet Worldwide has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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