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Euronet Outpaces Its Industry YTD: Can the Rally Continue?

Zacks Equity Research

Euronet Worldwide, Inc. EEFT has been in investor’s good books, riding high on its solid segments, operating performance led by revenue growth and inorganic strategies.

Year to date, this Zacks Rank #3 (Hold) have gained 54.9%, outperforming its industry's growth of 24.8%. Its earnings managed to surpass the Zacks Consensus Estimate in the trailing four quarters, the average being 2.93%.

Solid Performance in 2019

The company has been performing strongly on the back of  strong contribution from each of its  three segments as well as diversity across products and geographies. In the first nine months of 2019, revenues increased 9% year over year, courtesy of impressive contributions made by its epay segment, EFT Processing Segment and Money Transfer segment.

Euronet’s inorganic growth story has also worked in its favor. At the end of the first nine months of 2019, the company had  47209 ATMs, up 13% year over year. Several initiatives, such as the ATM network participation agreement with Remitly, Ripple, etc. poise the company well for growth.Its Ria Money Transfer segment is also progressing owing to several alliances. Euronet recently partnered with Visa Inc. for advancement of fintech companies in the Asia-Pacific area.

Its EFT segment has been witnessing consecutive years of double-digit growth, mainly driven by its steady focus on deploying more devices to extended markets and its ability to develop a cutting-edge technology for new products at both ATMs and POS terminals for optimizing and enriching the customer experience.

As of Sep 30, 2019, this segment processed transactions for 47,209 ATMs and around 305,000 POS terminals across Europe, the Middle East, Asia Pacific and the United States. It is also acting as a cash collection network for e-commerce companies like iTunes, GooglePlay, Amazon, Microsoft, etc. throughout Europe.

The Epay segment has been substantially contributing to the company’s overall growth, banking on higher transactions, expansion of digital media products and SaaS solutions. Revenues from this business increased 4% year over year in the first nine months of 2019.

The Money Transfer Segment is consistently boosting the physical and digital distribution channels. In the first nine months, the same climbed 6% year over year on higher money transfers, attributable to growth in the foreign agent and correspondent payout networks. This segment’s network was available in around 389,000 locations at the end of third-quarter 2019.

The company’s low leverage and improving cash and cash equivalents also reflect its solid balance sheet. Its times interest earned, a ratio that measures its ability to pay its interest expenses, improved from 6.7X in 2015 to 8.8X in 2018. Its total debt to equity ratio stands at 99.5%, lower than its industry average of 174.7%.

Will the Game Continue in 2020?

Analysts remain positive about the company’s performance in 2020. It remains well-poised for growth on the back of ATM expansion, solid segments and online money transfer. Owing to ample balance sheet flexibility, the company would likely to continue looking at potential strategic targets. Multiple deals struck in different markets might constantly fuel its growth.

Epay segment is also tilted toward growth, aided by digital media strength. The EFT segment would likely witness a flourishing 2020, driven by the enhancement of its outsourced management solutions in the new and existing markets.

Certain acquisitions of the Money Transfer segment along with increasing money transfers should lead to the segment’s long-term growth.

The company has an impressive Growth Score of A, which analyzes its growth prospects. Its long-term growth rate stands at 10%, higher than its industry average of 9.4%.

For 2020, the Zacks Consensus Estimate for earnings stands at $8.02, hinting at 14.8% growth from the year-earlier reported figure. Further, the consensus mark for revenues is pegged at $3.05 billion, implying a 10% rise from the year-earlier reported figure.

Stocks to Consider

Investors interested in the same space might consider some better-ranked stocks like CURO Group Holdings Corp. CURO, Cardtronics PLC CATM and Global Payments Inc. GPN.

CURO Group Holdings is a diversified consumer finance company. This Zacks Rank #2 (Buy) stock delivered a positive earnings surprise of 16.6% over the preceding four quarters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cardtronics offers automated consumer financial services through its network of automated teller machines and multi-purpose financial services kiosks. The company came up with average four-quarter beat of 28.8% and flaunts a Zacks Rank of 1.

Global Payments provides payment technology and software solutions for card, electronic, check and digital-based payments. The company has a Zacks Rank of 2 and average four-quarter positive surprise of 2.4%.

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