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WEX Meets Earnings Estimates in Q3, Updates '19 Guidance

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WEX Inc. (WEX - Free Report) third-quarter 2019 earnings matched the Zacks Consensus Estimate but revenues missed the same.

Adjusted earnings of $2.59 per share increased year over year. The reported figure exceeded the midpoint ($2.57) of the company’s guided range of $2.52-$2.62 per share.

Total revenues of $460 million missed the consensus mark by roughly $1 million but improved year over year, driven by double-digit growth in all segments. Revenues met the midpoint of the guided range of $455-$465 million.

Shares of the company have gained a massive 40.9% year to date, outperforming the 39.7% rally of the industry it belongs to.

Let’s check out the numbers in detail.

Revenues by Segment

Fleet Solutions revenues (60% of total revenues) increased 11% year over year to $277.5 million, driven by robust transaction volume growth and higher late fee and payment processing rates, partially offset by lower fuel prices.

Average number of vehicles serviced was around 14.3 million, up 22% from the year-ago quarter. Total fuel transactions processed increased 14% from the year-ago quarter to 162.2 million. Payment processing transactions rose 15% to 135.2 million. U.S. retail fuel price declined 8% to $2.80 per gallon.

Travel and Corporate Solutions revenues (22%) of $99.1 million were up 20% year over year, driven by a 20% year-over-year increase in purchase volume. The company witnessed strength in accounts payable products and contributions from the Noventis acquisition.

Health and Employee Benefit Solutions revenues (18%) of $83.3 million increased 54% year over year, driven by strong performance of the company’s U.S. healthcare business (revenues grew 73% year over year). Acquisition of Discovery Benefits added $25 million to revenues. The average number of Software-as-a-Service (SaaS) accounts in the United States grew 18% year over year to 13 million.

WEX Inc. Revenue (TTM)

Operating Results

Adjusted operating income increased 21.7% from the prior-year quarter to $185.1 million. Adjusted operating income margin increased to 40.2% from 39.3% in the prior-year quarter.

Balance Sheet

WEX exited the third quarter with cash and cash equivalents of $531.4 million compared with $768.4 million at the end of the prior quarter. Long-term debt was $2.7 billion, compared with $2.8 billion in the previous quarter.

Q4 Guidance

WEX expects revenues in the range of $452-$462 million, the midpoint ($457 million) of which is higher than the current Zacks Consensus Estimate of $453.2 million.

Adjusted earnings are expected in the range of $2.51-$2.61 per share, lower than the Zacks Consensus Estimate of $2.66.

The company’s fourth-quarter guidance is based on an assumed average U.S. retail fuel price of $2.76 per gallon and fleet credit loss between 14 and 19 basis points.

2019 Guidance

WEX updated its full-year 2019 guidance. The company now expects revenues in the range of $1.736 billion to $1.746 billion, compared with the previous guidance of $1.720-$1.750 billion. The midpoint of the revised guided range is in line with the current Zacks Consensus Estimate of $1.74 billion.

Adjusted earnings are expected in the range of $9.10 to $9.20 per share, compared with the previous expectation of $9.10-$9.35 per share. The revised guided range is below the Zacks Consensus Estimate of $9.25.

The company’s full-year guidance is based on an assumed average U.S. retail fuel price of $2.79 per gallon and fleet credit loss ranging between 13 and 14 basis points. The company also assumes around 43.8 million shares outstanding for the fourth quarter and full year.

Zacks Rank & Upcoming Releases

Currently, WEX carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Investors interested in the broader Zacks Business Services sector are awaiting third-quarter 2019 earnings of key players like Fiserv (FISV - Free Report) , ICF International (ICFI - Free Report) and FLEETCOR Technologies (FLT - Free Report) , each scheduled to release results on Nov 6.

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