It has been about a month since the last earnings report for Euronet Worldwide (EEFT Quick QuoteEEFT - Free Report) . Shares have lost about 9.5% 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 the most recent earnings report in order to get a better handle on the important drivers.

Euronet's Q2 Earnings Beat on Strong epay Segment

Euronet Worldwide reported second-quarter 2023 adjusted earnings of $2.03 per share, which beat the Zacks Consensus Estimate by 1%. The bottom line climbed 17% year over year.

Total revenues advanced 11% year over year and on a constant-currency basis to $939.1 million in the quarter under review. The top line beat the consensus mark by 1.8%.

The quarterly results benefited on the back of solid contributions from EFT Processing, epay and Money Transfer segments. Expanding physical and digital transactions, prudent cost management, a strong point-of-sale ("POS") card acquiring business and promotional activity benefits were tailwinds to EEFT’s performance. However, the upside was partly offset by an elevated expense level.

Q2 Update

EEFT reported a net income of $1.65 per share in the second quarter, which surged 52.8% year over year. Adjusted operating income improved 18% year over year and on a constant-currency basis to $119.6 million but fell short of our estimate of $154.4 million.

Total operating expenses of $816.5 million escalated 10% year over year in the quarter under review and came higher than our estimate of $764 million. The increase was due to higher direct operating costs, salaries and benefits and selling, general and administrative expenses.

Adjusted EBITDA rose 13% year over year and on a constant-currency basis to $165.8 million but missed our estimate of $202.5 million.

Segmental Performances

The EFT Processing segment’s revenues grew 13% year over year and on a constant-currency basis to $282.4 million in the second quarter. The metric beat our estimate of $270.9 million.

Adjusted EBITDA came in at $89.9 million, up 12% year over year and on a constant-currency basis but fell short of our estimate of $105.1 million.

The segment’s operating income of $69.1 million climbed 26% year over year in the quarter under review but missed our estimate of $80.9 million. Total transactions advanced 29% year over year.

The unit’s results gained from continued rebound in travel and a well-performing POS card acquiring business, which in turn, led to growing domestic and international cash withdrawal transactions. Substantial volume increase in low-priced payment processing transactions across Asia Pacific also contributed to the segment’s strength.  

The epay segment recorded revenues of $263.8 million in the second quarter, which rose 16% year over year (up 15% on a constant-currency basis) and surpassed our estimate of $249.3 million.

Adjusted EBITDA rose 10% year over year and on a constant-currency basis to $28.5 million, lower than our estimate of $36.7 million.

Operating income came in at $26.8 million, which increased 10% year over year or 11% on a constant-currency basis, but missed our estimate of $35.2 million. However, transactions declined 12% year over year to 984 million in the quarter under review.

Growth in digital branded payments and perks from promotional activities aided the segment’s quarterly performance.

The Money Transfer segment’s revenues totaled $394.8 million, which grew 7% year over year and on a constant-currency basis in the second quarter. Yet, the metric fell short of our estimate of $400 million.

Adjusted EBITDA of $55.3 million advanced 12% year over year and on a constant-currency basis but lagged our estimate of $65.6 million.

Operating income improved 16% year over year or 15% on a constant-currency basis to $47.2 million in the quarter under review but missed our estimate of $56.5 million. Total transactions of 41.1 million grew 10% year over year.

The segmental results benefited on the back of 11% growth in U.S.-outbound transactions and 13% increase in international-originated money transfers.

Corporate and Other’s expenses increased 10.2% year over year to $20.5 million due to higher long-term compensation expenses.

Financial Update (as of Jun 30, 2023)

Euronet exited the second quarter with cash and cash equivalents of $1,139.1 million, which inched up 0.7% from the figure at 2022 end. Total assets of $5,221 million declined 3.4% from the 2022-end level.

Debt obligations, net of the current portion, totaled $1,306.5 million, which dropped 18.8% from the figure as of Dec 31, 2022.

Equity advanced 11% from the 2022-end level to $1,381.7 million.

There was roughly $1,055 million left under EEFT’s revolving credit facilities at the second-quarter end.

3Q23 Outlook

Management forecasts adjusted earnings to be $2.70 per share in the third quarter of 2023, which indicates a decline of 1.5% from the prior-year quarter’s reported figure.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Euronet Worldwide has a strong Growth Score of A, 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 second 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Euronet Worldwide has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.