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Euronet Worldwide (EEFT) Down 10.6% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Euronet Worldwide (EEFT - Free Report) . Shares have lost about 10.6% 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 drivers.

Euronet's Q3 Earnings Beat, Revenues Improve Y/Y

Euronet reported third-quarter 2021 adjusted earnings of $1.77 per share, which surpassed the Zacks Consensus Estimate by 18%. The bottom line improved 58% year over year.

The company’s results benefited from improved revenues and prompt revival of EFT transactions, partly offset by elevated operating expenses.

It reported a net income of $1.37 per share in the third quarter, which soared 80.3% year over year.

Total revenues climbed 23% year over year (up 22% on a constant currency basis) to $816.6 million in the quarter under review. The top line beat the Zacks Consensus Estimate by 4.2%.

Adjusted operating income was $114.5 million, which surged 69% year over year (up 68% on a constant currency basis).

Total operating expenses increased 17.3% year over year to $702.1 million in the third quarter. The rise was due to higher direct operating costs, salaries and benefits, and selling, general and administrative costs.

Segmental Performances

The EFT Processing Segment reported total revenues of $227.1 million, which advanced 58% year over year (up 56% on a constant currency basis). The improvement can be attributed to partial relaxation of travel restrictions throughout Europe, which resulted in higher domestic and international withdrawal transactions. Substantial rise in volumes across low-value point-of-sale transactions in Europe also contributed to the segment’s performance.

Adjusted EBITDA of $85.8 million increased more than three-fold year over year in the quarter under review. Operating income increased more than 10-fold year over year to $63.2 million. Total transactions of the segment were 1,173 million, which expanded 29% year over year.

The epay Segment’s total revenues were $238.3 million, reflecting a rise of 20% year over year (up 19% on a constant currency basis). The upside was driven by constant digital media and mobile growth in selected markets, and sustained expansion of the digital distribution channel.

Adjusted EBITDA of $28.2 million advanced 16% year over year in the third quarter. Operating income improved 17% year over year to $25.9 million. The segment’s transactions of 811 million increased 23% year over year.

Total revenues of the Money Transfer Segment amounted to $353.5 million in the quarter, reflecting a rise of 9% year over year (up 8% on a constant currency basis). Rise in U.S. outbound transactions, direct-to-consumer digital transactions and international-originated money transfers contributed to the sound segmental performance. However, the upside was partly offset by headwinds stemming from the U.S. domestic business.

Adjusted EBITDA of $46.5 million declined 20% year over year. Operating income slumped 21% year over year to $37.6 million in the third quarter. Total transactions of the segment rose 10% year over year to 34.1 million.

Corporate and Other reported an expense of $12.2 million in the quarter under review, which increased 23.2% year over year. The rise was primarily due to increased short- and long-term compensation expenses.

Financial Update (as of Sep 30, 2021)

Euronet exited the third quarter with cash and cash equivalents of $1.1 billion which declined 26.2% from the level at 2020 end.

Total assets of $4.5 billion dropped 8.1% from the level as of Dec 31, 2020.

Debt obligations, net of current portion, decreased 16.7% from the 2020-end figure to $1.2 billion.

 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 19.62% due to these changes.

VGM Scores

At this time, Euronet Worldwide has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Estimates have been 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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