Euronet Worldwide, Inc. EEFT recently withdrew its initial guidance for the first quarter of 2020 due to the coronavirus or COVID-19 effect on global economy.
The global pandemic, as declared by the World Health Organization, has taken a toll on the market where in Euronet is not an exceptional entity.
The company earlier provided its adjusted earnings per share outlook for the first quarter of 2020 (assuming that foreign currency exchange rates and share price remain stable through the end of the period) to be approximately 95 cents.
Rationale Behind the Withdrawal
The company’s EFT segment, which contributed to 32% of its total revenues in 2019, has been witnessing a downtrend in international transactions due to travel restrictions imposed by the respective governments. World and domestic transactions see a massive reduction as governments are strictly regulating people’s movements within the country or state.
This particular segment has been witnessing solid growth over the past few years on the back of the company’s steady focus on expanding across the extended markets and its ability to develop an advanced technology for new products on both platforms of ATMs and POS terminals for optimizing and enriching the customer experience.
Moreover, the company’s epay segment, which accounted for around 28% of its total revenues, also noticed certain pressure on its overall transactions because of population movement restraints as well as hike in transaction volume and increased size of transaction, driven by higher consumer usage of mobile devices and streaming as well as gaming applications. The epay segment has also been performing well over the last several quarters, aided by higher transactions, expansion of digital media products and SaaS solutions.
Notably, The Money Transfer Segment witnessed stronger-than-expected volume in the initial weeks of March as customers were making the most of the volatility in foreign exchange rates. However, Euronet anticipates this upside to be temporary and workers affected by business closures, will impact the money transfer transactions.
It should be noted that its Ria Money Transfer announced that its money transfer services will stay active despite the current crisis caused by the pandemic. This measure has been taken by the company considering remittances represent a lifeline for millions of people across the globe. Ria Money took all the precautionary measures to prevent the spread of the dreadful virus while providing its fund transfer services to its customers.
The effect of COVID-19 on the company’s first-quarter results cannot be rightly estimated at the moment due to its rampant nature.
However, the company remains confident of its performance on the back of its well-diversified business, strong financial position and prudent strategy.
Shares of this Zacks Rank #3 (Hold) company have lost 42.9% in a year’s time, wider than its industry’s decline of 37.8%.
Stocks to Consider
Investors interested in the same space can take a look at some better-ranked stocks like Houlihan Lokey, Inc. HLI, PRA Group, Inc. PRAA and MoneyGram International Inc. MGI. While Pra Group sports a Zacks Rank #1 (Strong Buy), Houlihan Lokey and MoneyGram carry a Zacks Rank #2 (Buy), reporting a positive surprise of 20%, 18.9% and 150%, respectively, in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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