Why Is Euronet Worldwide (EEFT) Down 21.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Euronet Worldwide (EEFT). Shares have lost about 21.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Euronet Worldwide due for a breakout? 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.
Euronet's Q4 Earnings Miss Estimates, Increase Y/Y
Euronet reported adjusted earnings of $1.15 per share for fourth-quarter 2021, missing the Zacks Consensus Estimate of $1.33 by 13.5% due to steep expenses. The bottom line improved 4% year over year.
EEFT reported a net loss of 6 cents per share for the fourth quarter against the prior-year quarter’s net income of $1.31.
Total revenues improved 15% year over year to $811.5 million in the quarter under review. Further, the top line outpaced the Zacks Consensus Estimate by 0.6%.
EEFT gained from double-digit consolidated revenues and adjusted EBITDA growth rates. Euronet also gained from EFT processing, epay and Money Transfer segmental performances.
In the fourth quarter, operating income amounted to $29 million, which decreased 42% year over year.
Total operating expenses increased 19.2% year over year to $782.5 million due to a rise in direct operating costs, salaries and benefits, and contract asset impairment as well as selling, general and administrative expenses.
Adjusted EBITDA was up 23% year over year to $112.9 million.
Segmental Results
The EFT Processing Segment’s total revenues of $163.5 million surged 63% (up 68% on a constant currency basis) year over year owing to higher domestic and international withdrawal transactions, resulting from partial lifting of travel restrictions in Europe. Other factors contributing to the upside include volume expansion of low-value point-of-sale transactions in Europe and low-value payment processing transactions from an Asia Pacific customer.
Adjusted EBITDA came in at $25.9 million during the quarter, which compared favorably with the prior-year quarter’s figure of $1 million.
Operating income of $1.8 million compared favorably with the year-ago quarter’s operating loss of $21.2 million. This segment’s total transactions of 1279 million rose 42% year over year in the fourth quarter.
The epay Segment’s total revenues of $286.9 million rose 4% year over year (up 7% on constant currency basis).
Adjusted EBITDA totaled $42.6 million, which inched up 1% year over year (up 5% on constant currency basis).
Operating income amounted to $40.6 million, reflecting a year-over-year ascent of 2% (up 7% on constant currency basis). Reported transactions advanced 21% year over year to 854 million in the quarter. The results are attributable to customer growth across digital media and mobile growth along with continued expansion of the digital distribution channel. Other factors leading to solid fourth-quarter results are decreased mobile operator commissions.
The Money Transfer Segment’s total revenues of $363.3 million rose 10% year over year (up 11% on constant currency basis) in the quarter. The upside can be attributed to an uptick in the U.S. and international-outbound transactions, excluding the Middle East and Asia as well as growth in the direct-to-consumer digital transactions. The same was partly offset by a dip in Asia and the Middle East transactions and declines in the U.S. domestic business.
Adjusted EBITDA was $50.1 million in the quarter under review, which decreased 8% year over year (down 5% on constant currency basis). Operating income totaled $2.7 million, which compared unfavorably with the year-ago quarter’s reported figure of $45 million. This segment’s total transactions rose 10% year over year to 35.7 million in the fourth quarter.
Corporate and Other reported an expense of $16.1 million for the quarter, which increased 19.3% year over year, primarily due to a rise in long-term compensation expense.
Financial Update
As of Dec 31, 2021, total assets summed $4.74 billion, which plunged 3.7% from the level at 2020 end.
Cash and cash equivalents of $1.26 billion at the end of the fourth quarter fell 11.3% from the level at 2020 end.
Debt obligations, net of current portion, slipped 1.2% from the level as of Dec 31, 2020 to $1.4 billion at the end of 2021. At the end of the year, $690 million was available under its revolving credit facilities.
2021 Update
Full-year EPS came in at $3.69 per share, up 31% year over year. Revenues for the year rose 21% year over year (18% at CC).
Adjusted operating income for EEFT rose 45% year over year. Adjusted EBITDA increased 31% from the prior-year quarter’s level.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -38.22% due to these changes.
VGM Scores
At this time, Euronet Worldwide has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Euronet Worldwide has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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