A month has gone by since the last earnings report for Wex (WEX). Shares have added about 2.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Wex due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
WEX Misses on Q2 Earnings & Revenue Estimates
WEX reported lower-than-expected second-quarter 2020 results.
Adjusted earnings of $1.21 per share (excluding 45 cents from non-recurring items) missed the Zacks Consensus Estimate by 16% and decreased 46.9% year over year. Total revenues of $347.1 million fell short of the consensus mark by 1.7% and decreased 21.4% year over year.
In response to the WEX’s implementation of several cost cut initiatives due to the COVID-19 crisis, the company expects its total saving to be approximately $60-$65 million for the year.
Revenues by Segment
Fleet Solutions revenues (59% of total revenues) decreased 24% year over year to $204.4 million. The downside was due to weak finance fee revenues and payment processing revenues related to two major North America portfolios.
Average number of vehicles serviced was 15.1 million, up 8% from the year-ago quarter’s figure. Total fuel transactions processed fell 17% from the year-ago quarter’s tally to 127.9 million. Payment processing transactions fell 19% to 103.1 million. U.S. retail fuel price declined 28.9% from the year ago quarter to $2.07 per gallon.
Travel and Corporate Solutions revenues (15.7%) of $54.5 million were down 40% year over year. The downtick can be attributed to weakness in the finance fee revenues and payment processing revenues .The coronavirus pandemic’s adverse impact on travel volumes strained the segment’s revenues. Purchase volume decreased 68% to $3.2 billion.
Health and Employee Benefit Solutions revenues (25.4%) of $88.2 million jumped 6%, year over year, on 15% growth in the average number of Software-as-a-Service (SaaS) accounts in the United States to 14.5 million.
Adjusted operating income decreased 40.2% from the prior-year quarter’s figure to $99.4 million. Adjusted operating income margin declined to 28.7% from the year-ago quarter’s 37.7%.
WEX exited the second quarter with cash and cash equivalents of $1.3 billion compared with the $861.2 million witnessed at the end of the prior quarter. Long-term debt was $2.7 billion, nearly flat with the previous quarter’s reported figure.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -9.09% due to these changes.
Currently, Wex has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Wex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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