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WEX Beats on Q1 Earnings and Revenues, Raises 2019 View

Zacks Equity Research

WEX Inc. WEX reported better-than-expected first-quarter 2019 results.

Adjusted earnings of $1.72 per share outpaced the consensus estimate by 3 cents but declined year over year. The reported figure exceeded the company’s guided range of $1.64-$1.70.

Total revenues of $381.9 million beat the consensus mark by $1.5 million and improved year over year, driven by strong performance of Travel and Corporate Solutions and Health and Employee Benefit Solutions segments. Revenues exceeded the guided range of $375-$380 million.

Shares of the company have gained a massive 44.1% year to date, significantly outperforming the 25.3% rally of the industry it belongs to.

 

Let’s check out the numbers in detail.

Revenues by Segment

Fleet Solutions revenues (61% of total revenues) increased 1% year over year to $232.8 million due to higher volume growth and increased late fees, partially offset by fewer business sales and lower fuel prices.

Average number of vehicles serviced was around 13.1 million, up 14% from the year-ago quarter. Total fuel transactions processed increased 7% from the year-ago quarter to 140.5 million. Payment processing transactions increased 5% to 115.4 million. U.S. retail fuel price increased 4% to $2.67 per gallon.

Travel and Corporate Solutions revenues (21%) of $81.6 million were up 22% year over year, driven by strong performance in the international markets and Corporate Payments, and contributions from the Noventis acquisition. Purchase volume increased 6% year over year to $8.4 billion.

Health and Employee Benefit Solutions revenues (18%) of $67.4 million increased 19% year over year, driven by strong performance of the company’s U.S. healthcare business (revenues grew 31% year over year). Acquisition of Discovery Benefits added $8 million in revenue. The average number of Software-as-a-Service (SaaS) accounts in the United States grew 18% year over year to 12.7 million.

WEX Inc. Revenue (TTM)

WEX Inc. Revenue (TTM) | WEX Inc. Quote

Operating Results

Operating income decreased 17.8% from the prior-year quarter to $68.9 million. Operating income margin declined to 18.1% from 23.7% in the prior-year quarter.

Balance Sheet

WEX exited first quarter with cash and cash equivalents of $387.3 million compared with $541.5 million at the end of the prior quarter. Long-term debt was $2.8 billion compared with $2.1 billion at the end of the prior quarter.

Q2 Guidance

WEX expects revenues in the range of $438-$443 million, the midpoint ($440.5 million) of which is higher than the current Zacks Consensus Estimate of $440.1 million.

Adjusted earnings are expected in the range of $2.22-$2.28 per share, lower than the Zacks Consensus Estimate of $2.30.

The company’s first-quarter guidance is based on an assumed average U.S. retail fuel price of $2.85 per gallon and fleet credit loss ranging between 11-16 basis points.

2019 Guidance

WEX raised itsfull-year 2019 guidance. The company expects revenues in the range of $1.705 billion to $1.745 billion, compared with the previous guidance of $1.680-$1.720 billion. The midpoint ($1.725 billion) of the revised guided range is below the current Zacks Consensus Estimate of $1.730 billion.

Adjusted earnings are expected in the range of $9.10 to $9.50 per share, compared with the previous expectation of $8.80-$9.20 per share. The midpoint ($9.30) of the revised guided range is above the Zacks Consensus Estimate of $9.16.

The company’s full-year guidance is based on an assumed average U.S. retail fuel price of $2.78 per gallon and fleet credit loss ranging between 13-18 basis points. The company also assumes almost 43.8 million shares outstanding for the second quarter and full year.

Zacks Rank & Upcoming Releases

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

Investors interested in the broader Zacks Business Services sector are awaiting reports of key players like MAXIMUS MMS, Equifax EFX and Booz Allen Hamilton BAH. While MAXIMUS is slated to report second-quarter fiscal 2019 on May 9, Equifax is scheduled to release first-quarter 2019 results on May 10 and Booz Allen Hamilton is set to report fourth-quarter fiscal 2019 on May 28.

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