A month has gone by since the last earnings report for Green Dot (GDOT). Shares have added about 4.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Green Dot due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Green Dot Beats Q2 Earnings Estimates
Green Dot delivered impressive second-quarter 2019 results, with earnings and revenues beating the Zacks Consensus Estimate.
Non-GAAP EPS of 90 cents beat the consensus mark by 27 cents and increased 21.6% year over year, driven by better operating performance. Non-GAAP operating revenues of $265 million beat the consensus mark by $4 million. Revenues benefited from strength in the BaaS Platform product line and the processing and settlement segment.
Account Services non-GAAP operating revenues came in at $206.3 million, up 1.8% from the year-ago quarter driven by increase in direct deposit active accounts despite an overall decline in the number of active accounts. Processing and Settlement Services non-GAAP operating revenues of $66.4 million grew 14.3% from the year-ago quarter driven by increased transaction volumes across product lines.
Gross dollar volume grew 6.4% year over year to $10 billion. Purchase volume increased 2.3% from the prior-year quarter to $6.5 billion. The reported quarter ended with 5.7 million active accounts (down 3.4% y/y) and 11.3 million cash transfers (up 6.5% y/y). The number of tax refunds processed was 2.5 million compared with 2.8 million in the year-ago quarter.
Adjusted EBITDA of $74.6 million increased 18.4% on a year-over-year basis. Adjusted EBITDA margin of 28.2% increased from 24.9% in the year-ago quarter.
Balance Sheet & Cash Flow
Green Dot exited the quarter with cash, cash equivalents and restricted cash balance of $1.1 billion compared with $1.7 billion at the end of the prior quarter. The company has no long-term debt. It generated $51.7 million of cash from operating activities and capex was $18.4 million.
Both quarterly and yearly guidance disappointed. Management guided 2019 non-GAAP EPS in the range of $2.71 and $2.77, which is below the previous guidance of $2.82-$2.91. For the third quarter, expected non-GAAP EPS is 2 cents.
Non-GAAP operating revenues for 2019 are expected in the range of $1.06 to $1.08 billion, below the previous guidance of $1.114-$1.134 billion. For the third quarter, non-GAAP operating revenues are anticipated between $225 and $230 million.
2019 adjusted EBITDA is expected between $240 million and $244 million versus the previous guidance of $255 million to $261 million. For the third quarter, adjusted EBITDA is forecasted between $12 million and $14 million.
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 -163.73% due to these changes.
Currently, Green Dot has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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, Green Dot has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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