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WEX Q4 Earnings and Revenue Surpass Estimates, Rise Y/Y

Zacks Equity Research

WEX Inc. WEX reported strong fourth-quarter 2018 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings of $2.11 per share outpaced the consensus estimate by 2 cents and increased year over year. The reported figure exceeded the midpoint of the company guided range of $2.05-$2.15. The bottom line benefited from organic growth, favorable macroeconomic conditions and a lower tax rate.

Total revenues of $381.2 million beat the consensus mark by $7.7 million and increased 14.9% year over year. Higher fuel prices contributed $13.5 million to revenues. Revenues exceeded the guided range of $370-$380 million.

The fourth quarter marked the tenth consecutive quarter of double-digit top-line growth, driven by strong performance of the company’s Fleet Solutions and Travel and Corporate Solutions segments and its U.S. healthcare business.

Shares of WEX have gained 19.1% over the past year, compared with the 19.2% rise of the industry it belongs to.

 

Let’s check out the numbers in detail.

Revenues by Segment

Fleet Solutions revenues (67% of total revenues) increased 15% year over year to $253.7 million due tohigher volume growth, increased late fees and favorable macroeconomic tailwinds including higher fuel prices.

Average number of vehicles serviced was around 12.5 million, up 11% from the year-ago quarter. Total fuel transactions processed increased 7% from the year-ago quarter to 139.5 million. Payment processing transactions increased 7% to 115.9 million. U.S. retail fuel price increased 9.7% to $2.94 per gallon.

Travel and Corporate Solutions revenues (20%) of $77.9 million climbed 29% year over year on the back of strong international performance (driven by Europe, Brazil and Australia) and travel business growth (of 13%) and corporate payments growth (almost more than 100%) in the United States. Purchase volume increased 11% year over year to $8.2 billion.

Health and Employee Benefit Solutions revenues (13%) of $49.4 million declined 4% year over year due to low bound Brazilian benefits business. However, the company’s U.S. healthcare business revenues increased 12% in the reported quarter.

The average number of Software-as-a-Service (SaaS) accounts in the United States grew 17% year over year to 11.5 million.

Operating Results

Operating income increased 27.7% from the prior-year quarter to $93.7 million. Operating income margin rose to 24.6% from 22.2% in the prior-year quarter.

WEX Inc. Price, Consensus and EPS Surprise

 

WEX Inc. Price, Consensus and EPS Surprise | WEX Inc. Quote

Balance Sheet

WEX exited fourth-quarter 2018 with cash and cash equivalents of $541.49 million compared with $533.36 million at the end of the prior quarter. Long-term debt was $2.13 billion compared with $2.14 billion at the end of the prior quarter.

Guidance

First-Quarter 2019

For first-quarter 2019, WEX expects revenues in the range of $375-$380 million. The current Zacks Consensus Estimate of $377.98 million is higher than the guided range.

Adjusted earnings are expected in the range of $1.64-$1.70 per share. The current Zacks Consensus Estimate of $1.92 is higher than the guided range.

The company’s first-quarter guidance is based on an assumed average U.S. retail fuel price of $2.60 per gallon and fleet credit loss ranging between 13-18 basis points.

Full Year 2019

For full year 2019, the company expects revenues in the range of $1.68-$1.72 billion. The current Zacks Consensus Estimate of $1.64 billion is lower than the guided range.

Adjusted earnings are expected in the range of $8.80-$9.20 per share. The Zacks Consensus Estimate of $8.95 per share lies within the guided range.

The company’s full-year guidance is based on an assumed average U.S. retail fuel price of $2.63 per gallon and fleet credit loss ranging between 13-18 basis points.The company also assumes almost 43.9 million shares outstanding. Adjusted net income tax rate is expected to be between 24.5% and 26%.

Zacks Rank & Upcoming Releases

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

Investors interested in the broader Zacks Business Services sector are keenly awaiting earnings reports of key players like FactSet FDS, Paychex PAYX and Accenture ACN. While FactSet and Accenture are slated to report second-quarter fiscal 2019 on Mar 26 and Mar 28, respectively, Paychex is scheduled to release third-quarter fiscal 2019 results on Mar 27.

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