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Euronet (EEFT) Down 5.6% Despite Q2 Earnings Beat Estimates

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Euronet Worldwide, Inc. (EEFT - Free Report) shares tumbled 5.6% since it reported second-quarter earnings on Jul 27. Investors might have been worried about the potential profit EFFT will be unable to capture in 2022 due to several factors like the Russia/Ukraine conflict, currency changes, cost inflation, and travel inefficiency impacts.

Euronet reported second-quarter 2022 adjusted earnings of $1.73 per share, which beat the Zacks Consensus Estimate of $1.64. The bottom line surged from 53 cents per share a year ago.

Total revenues of $843.3 million rose from $714.7 million a year ago. The top line beat the consensus mark by 4.6%.

The strong second-quarter results were supported by solid EFT Processing performance, recovery in the travel market, and growing transaction volumes. This was partially offset by increased operating expenses.

Euronet Worldwide, Inc. Price, Consensus and EPS Surprise

Euronet Worldwide, Inc. Price, Consensus and EPS Surprise

Euronet Worldwide, Inc. price-consensus-eps-surprise-chart | Euronet Worldwide, Inc. Quote

Q2 Facts

EEFT reported a net income of $57.3 million in the second quarter, up from $8.6 million a year ago. Operating income amounted to $101.1 million, which increased 236% year over year in the quarter under review.

Total operating expenses of $742.2 million escalated from the year-ago quarter’s $684.6 million on higher direct operating costs, salaries and benefits, SG&A, and depreciation and amortization expenses.

Adjusted EBITDA rose 97% year over year to $147.2 million in the second quarter.

Segmental Performance

The EFT Processing segment reported total revenues of $249 million, which soared 119% year over year (up 144% on a constant currency basis). The segment was supported by higher domestic and international withdrawal transactions thanks to the ongoing recovery in travel, higher POS processing revenues from the Piraeus Bank's merchant acquiring business buyout, and strong operations in the Asia Pacific market.

Adjusted EBITDA was $80.5 million against the prior-year quarter’s negative figure of $3.1 million. The segment’s operating income of $54.8 million improved from the year-ago quarter’s loss of $25.3 million. Total transactions of the segment witnessed a 59% year-over-year rise to 1,573 million in the second quarter.

Revenues of the epay segment slid 7% year over year but rose 2% on a constant-currency basis to $227.7 million. The loss of a key client in Europe and inflationary pressures affected the segment in the second quarter.

Adjusted EBITDA was $25.9 million, which fell 12% year over year in the second quarter. Operating income declined 11% year over year to $24.3 million. Transactions witnessed a 42% year-over-year increase to 1,116 million.

The Money Transfer segment’s total revenues amounted to $368.5 million, which advanced 3% year over year (up 9% on a constant-currency basis) in the quarter. Increased U.S.-outbound transactions, internationally originated money transfers and digital transactions helped the segment.

Adjusted EBITDA dropped 8% year over year to $49.2 million in the quarter under review. Operating income of $40.6 million decreased 8% year over year. Total transactions grew 9% year over year to 37.3 million in the second quarter.

Corporate and Other reported expenses of $18.6 million, which escalated from $15.8 million a year ago due to increased short and long-term compensation expenses.

Financial Update (as of Jun 30, 2022)

Euronet exited the second quarter with cash and cash equivalents of $1,014.9 million, which decreased from the 2021-end level of $1,260.5 million. Total assets of $5,195.5 million increased from $4,744.3 million at the 2021 end.

Debt obligations, net of the current portion, elevated from the $1,420.1 million level as of Dec 31, 2021, to $1,638.7 million. Short-term debt obligations were at $453.6 million at the second quarter-end. Equity of $1,019.1 million dropped from the 2021-end level of $1,255.5 million. At the end of the second quarter, around $475 million was available under its revolving credit facilities.

Net cash provided by operating activities was $180.7 million in the first half of 2022, up from $173.3 million in the year-ago period.

Share Repurchase Update

Euronet bought back shares worth $104.6 million in the second quarter.

2022 Guidance

Management expects adjusted earnings per share for 2022 to remain within the $6.30-$6.40 range, which will incorporate a downside of 10 cents related to the Russia/Ukraine conflict.

Earlier, EEFT stated that the epay segment could witness low-double-digit earnings growth this year. Operating margins of the Money Transfer segment are likely to improve in the second half of 2022.

Zacks Rank & Key Picks

Euronet currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader finance space are Owl Rock Capital Corporation (ORCC - Free Report) , SmartFinancial, Inc. (SMBK - Free Report) and Paramount Group, Inc. (PGRE - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Headquartered in New York, Owl Rock Capital is a specialty finance company that lends funds to U.S. middle market companies. The Zacks Consensus Estimate for ORCC’s 2022 bottom line indicates 4% year-over-year growth.

Based in Knoxville, TN, SmartFinancial is a leading financial services provider for individuals and corporate clients. The Zacks Consensus Estimate for SMBK’s 2022 earnings indicates 18% year-over-year growth.

New York-based Paramount Group works as a fully-integrated real estate investment trust. The Zacks Consensus Estimate for PGRE’s 2022 bottom line indicates 4.4% year-over-year growth.