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MoneyGram (MGI) Stock Up 1.8% Despite Q2 Earnings Miss
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MoneyGram International, Inc.’s shares have risen1.8% since it reported second-quarter results on Aug 5. Despite the weaker-than-expected results, investors were impressed by its continuous growth in the Money Transfer business.
MoneyGram reported second-quarter 2022 adjusted earnings per share of 9 cents, which missed the Zacks Consensus Estimate of 15 cents. However, the bottom line jumped from the year-ago earnings of 1 cent per share.
Revenues of $329.6 million were marginally up from $329.3 million a year ago but missed the Zacks Consensus Estimate of $330 million by a whisker.
The weaker-than-expected second-quarter results were caused by a strengthening dollar value against major currencies and higher operating expenses. The negatives were partially offset by MGI’s strong digital business performance thanks to increased cross-border transactions and fees.
MoneyGram International Inc. Price, Consensus and EPS Surprise
While fees and other revenues declined from $327.3 million a year ago to $324.5 million in the second quarter, investment revenues increased to $5.1 million from $2 million.
Total operating expenses of $139.8 million increased from $129.7 million a year ago, primarily due to higher transaction and operations costs. Interest expense dropped to $12.1 million in the second quarter from $22.5 million in the year-ago period.
Adjusted EBITDA of $50 million fell from $54.8 million a year ago due to strengthening dollar value against major currencies. Adjusted EBITDA margin contracted 140 basis points (bps) year over year to 15.2%.
Segments in Detail
Global Funds Transfer
Total revenues logged $312.1 million, decreasing from $315.3 million a year ago due to lower money transfer and bill-payment revenues caused by strengthening dollar value.
The Money Transfer business of MoneyGram continued to perform well in the quarter, attributable to a 5% year-over-year rise in transactions. Cross-border online revenues of MoneyGram Online grew 17% from a year ago, while transactions rose 14%. Cross-border customer growth jumped 11% from the year-ago period’s level.
In the second quarter, digital transactions rose 36% year over year. Digital transactions now constitute 44% of MoneyGram’s money transfer operations. Digital revenues climbed 36% year over year, attaining a record figure of $92 million. The segment reported a gross profit of $141.9 million for the second quarter, up from $137.8 million a year ago.
Financial Paper Products
Total revenues increased to $17.5 million from $14 million a year ago. While money order revenues of $10.6 million remained flat year over year, official check revenues jumped to $6.9 million from $3.4 million. The segment reported a gross profit of $15 million for the second quarter, up from $13.8 million a year ago.
Financial Position (as of Jun 30, 2022)
Cash and cash equivalents were $117.4 million, down from $155.2 million at 2021-end. MGI’s payment service obligations as of Jun 30, 2022, were $3,654.1 million, up from $3,591.4 million at 2021-end. Net debt was recorded at $786 million, down from the 2021-end level of $786.7 million.
MGI generated an adjusted free cash flow of $22.1 million in the second quarter, which rose from $6.5 million a year ago.
Capital expenditures were $12.1 million, reflecting an increase of $2.1 million from the second-quarter 2021 level.
Outlook
MoneyGram is expected to be acquired by Chicago-based private equity firm Madison Dearborn Partners, LLC for $1.8 billion. The deal is likely to close in the December quarter of 2022. The deal has already received nod from 32 money transmitter regulators.
Headquartered in Omaha, NE, Berkshire Hathaway is a holding company, which owns more than 90 subsidiaries in insurance, railroads, utilities, manufacturing services, retail and home building. The Zacks Consensus Estimate for Berkshire Hathaway’s 2022 bottom line indicates 5.3% 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.
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MoneyGram (MGI) Stock Up 1.8% Despite Q2 Earnings Miss
MoneyGram International, Inc.’s shares have risen1.8% since it reported second-quarter results on Aug 5. Despite the weaker-than-expected results, investors were impressed by its continuous growth in the Money Transfer business.
MoneyGram reported second-quarter 2022 adjusted earnings per share of 9 cents, which missed the Zacks Consensus Estimate of 15 cents. However, the bottom line jumped from the year-ago earnings of 1 cent per share.
Revenues of $329.6 million were marginally up from $329.3 million a year ago but missed the Zacks Consensus Estimate of $330 million by a whisker.
The weaker-than-expected second-quarter results were caused by a strengthening dollar value against major currencies and higher operating expenses. The negatives were partially offset by MGI’s strong digital business performance thanks to increased cross-border transactions and fees.
MoneyGram International Inc. Price, Consensus and EPS Surprise
MoneyGram International Inc. price-consensus-eps-surprise-chart | MoneyGram International Inc. Quote
Quarterly Operational Update
While fees and other revenues declined from $327.3 million a year ago to $324.5 million in the second quarter, investment revenues increased to $5.1 million from $2 million.
Total operating expenses of $139.8 million increased from $129.7 million a year ago, primarily due to higher transaction and operations costs. Interest expense dropped to $12.1 million in the second quarter from $22.5 million in the year-ago period.
Adjusted EBITDA of $50 million fell from $54.8 million a year ago due to strengthening dollar value against major currencies. Adjusted EBITDA margin contracted 140 basis points (bps) year over year to 15.2%.
Segments in Detail
Global Funds Transfer
Total revenues logged $312.1 million, decreasing from $315.3 million a year ago due to lower money transfer and bill-payment revenues caused by strengthening dollar value.
The Money Transfer business of MoneyGram continued to perform well in the quarter, attributable to a 5% year-over-year rise in transactions. Cross-border online revenues of MoneyGram Online grew 17% from a year ago, while transactions rose 14%. Cross-border customer growth jumped 11% from the year-ago period’s level.
In the second quarter, digital transactions rose 36% year over year. Digital transactions now constitute 44% of MoneyGram’s money transfer operations. Digital revenues climbed 36% year over year, attaining a record figure of $92 million. The segment reported a gross profit of $141.9 million for the second quarter, up from $137.8 million a year ago.
Financial Paper Products
Total revenues increased to $17.5 million from $14 million a year ago. While money order revenues of $10.6 million remained flat year over year, official check revenues jumped to $6.9 million from $3.4 million. The segment reported a gross profit of $15 million for the second quarter, up from $13.8 million a year ago.
Financial Position (as of Jun 30, 2022)
Cash and cash equivalents were $117.4 million, down from $155.2 million at 2021-end. MGI’s payment service obligations as of Jun 30, 2022, were $3,654.1 million, up from $3,591.4 million at 2021-end. Net debt was recorded at $786 million, down from the 2021-end level of $786.7 million.
MGI generated an adjusted free cash flow of $22.1 million in the second quarter, which rose from $6.5 million a year ago.
Capital expenditures were $12.1 million, reflecting an increase of $2.1 million from the second-quarter 2021 level.
Outlook
MoneyGram is expected to be acquired by Chicago-based private equity firm Madison Dearborn Partners, LLC for $1.8 billion. The deal is likely to close in the December quarter of 2022. The deal has already received nod from 32 money transmitter regulators.
Zacks Rank & Key Picks
MoneyGram currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader finance space are Berkshire Hathaway Inc. (BRK.B - 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 Omaha, NE, Berkshire Hathaway is a holding company, which owns more than 90 subsidiaries in insurance, railroads, utilities, manufacturing services, retail and home building. The Zacks Consensus Estimate for Berkshire Hathaway’s 2022 bottom line indicates 5.3% 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.