Euronet (EEFT) Q2 Earnings Beat on Strength in Segments

Zacks

Euronet Worldwide Inc. (EEFT) reported second-quarter 2014 net operating earnings of 54 cents per share, beating the Zacks Consensus Estimate of 50 cents by 8%. Results also surpassed the year-ago adjusted earnings of 44 cents by 23%.

The outperformance was driven by strong performance across all segments.

Including foreign currency exchange loss and intangible asset amortization, Euronet’s net income came in at $20.5 million or 38 cents per share against an income of $18.1 million or 35 cents per share in the prior-year quarter.

Operational Update

Total revenue of Euronet Worldwide grossed $395.5 million, up 16% year over year and 14% on a constant currency basis. Total revenue surpassed the Zacks Consensus Estimate of $378 million by 4.8%. Improvement in all the three segments contributed to the top-line growth in the quarter.

Total operating expenses of Euronet amounted to $361.4 million, increasing 15.2% year over year, primarily due to increase in operating costs and salaries, benefits and selling, as well as general and administrative expense.

Euronet’s adjusted earnings before interest, tax, depreciation and amortization (:EBITDA) increased 15% year over year to $54.8 million. The figure also marked a 11% year-over-year improvement on a constant currency basis.

Operating earnings for Euronet was $34.1 million, 23% higher year over year and up 17% on a constant currency basis.

Total transactions for Euronet climbed 8% year over year to 632 million from 587 million, driven by contribution from all segments.

Segment Details

The EFT Processing segment reported total revenue of $89.5 million, increasing 24% from the prior-year quarter and 22% on a constant currency basis. Its operating income rose 44% to $21.6 million from the second quarter of 2013 and increased 37% on a constant currency basis.

The improved performance came on the back of substantial growth in sales of value added products, and expanded ATM network in India and Europe.

Transactions increased 8% year over year largely driven by operations in Europe, partly offset by contract termination by IDBI Bank in India.

The epay segment reported total revenue of $182.0 million, increasing 3% from the prior-year quarter and 1% on a constant currency basis. Operating income amounted to $14.1 million in the second quarter, up 14% year over year and 11% on a constant currency basis.

The improvement was primarily due to increase in the demand for non-mobile content, partially offset by certain mobile content transaction declines.

Total transactions during the second quarter of 2014 increased 7% year over year to 300 million. The increase was mainly attributable to the growth in India and Germany, partially offset by a decline in the Middle East, Brazil, North America and the U.K

The Money Transfer segment’s total revenue improved 33% year over year and 31% on a constant currency basis to $124.3 million in the quarter under review. Operating income rose 23% year over year and 20% on a constant currency basis to $10.8 million in the second quarter of 2014.

A surge in total transactions contributed to growth in revenue and operating income. Total transactions increased 29% from the year-ago quarter to 11.5 million in the second quarter of 2014.

The improvement in revenues and transactions was due to the rise in organic growth in the Ria business, launch of Walmart-2-Walmart production and HiFX acquisition

The company’s Corporate and Other segment recorded total expenses of $12.4 million in the reported quarter, increasing 47.6% from $8.4 million in the second quarter of 2013. The increase resulted from acquisition-related expenses.

Financial Position

Euronet Worldwide exited the second quarter of 2014 with cash and cash equivalents of $408.4 million, increasing 95% from $209.8 million as of Dec 31, 2013.

Total assets of Euronet as of Jun 30, 2014 were $1.99 billion, compared with $1.59 billion as of Dec 31, 2013.

Long-term debt obligation in Euronet’s books amounted to $396.8 million, increasing from $188.5 million as of Dec 31, 2013. Shareholders equity amounted to $751.2 million at Jun 30, 2014 against $638.4 million at 2013-end. Euronet’s debt to capital ratio was 34.6% as of Jun 30, 2014, representing a deterioration of 1180 basis points from 22% at Dec 31, 2013. The deterioration was due to the acquisition of HiFX.

Guidance

On assumption of a constant foreign currency exchange rate, Euronet expects third-quarter 2014 adjusted cash earnings of 73 cents per share.

Performance of Other Competitors

American Express Co. (AXP), reported second-quarter 2014 operating earnings per share of $1.43, which outpaced the Zacks Consensus Estimate of $1.38 by 3.6% and was higher than the year-ago quarter figure of $1.27 by 12.6%.

CIT Group Inc.'s (CIT) second-quarter 2014 earnings from continuing operations of $1.02 per share surpassed the Zacks Consensus Estimate of 86 cents on the back of higher fee income. The reported figure was also better than 87 cents earned in the year-ago quarter.

FleetCor Technologies, Inc. (FLT) released second-quarter 2014 earnings of $1.21 per share, which outperformed the Zacks Consensus Estimate by a penny and rose significantly year over year.

Zacks Rank

Euronet currently carries a Zacks Rank #3 (Hold).

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