WU Western Union Company

Euronet Worldwide Inc. (EEFT) reported third quarter earnings of 42 cents per share, beating the Zacks Consensus Estimate of 35 cents as well as the year-ago quarter’s earnings of 37 cents. Operating earnings of $23.7 million in the reported quarter was 22.2% higher than $19.4 million recorded in the third quarter of 2011.

Including foreign exchange gain, intangible asset amortization, share-based compensation, non-cash 3.5% convertible debt accretion interest, non-cash GAAP tax expense and 3.5% convertible debt interest and amortization of issuance costs, the company reported net income of $14.6 million or 28 cents per share as against a loss of $3.2 million or 6 cents per share in the prior-year quarter.

Operational Update

During the quarter under review, total revenue of Euronet Worldwide grossed $316.4 million, climbing 6% from $299.5 million in the year-ago quarter. Total revenue was a tad above the Zacks Consensus Estimate of $314 million.

Total operating expenses for the reported quarter amounted to $292.2 million, increasing 4.6% from the prior-year quarter primarily due to increases in operating costs, salaries and benefit and depreciation and amortization.

Total operating income amounted to $24.2 million, increasing 20% over the year-ago quarter.

Total transactions for the company climbed 12% to 587 million, driven by contribution from all segments.

Segment Details

The EFT Processing Segment reported total revenue of $64.9 million, increasing 29% over the prior-year quarter. Its operating income surged 61% to $14.5 million over the third quarter of 2011.

The improved performance came on the back of substantial growth in its ATMs under management, increased transactions in all markets and seasonal increase in sales of value-added services in Europe. This segment recorded a total transaction of 302 million against 247 million in the year-ago quarter.

The epay Segment reported total revenue of $171.6 million, dipping 2% over the prior-year quarter. Operating income plunged 24% to $10.1 million during the reported quarter. Strong performance in Germany and the U.S. was more than offset by weak results from Brazil, Australia and Spain. Total transactions amounted to 277 million, increasing marginally by 2% over the prior-year quarter.

The Money Transfer Segment’s total revenue improved 7% over the year-ago quarter to $80.0 million in the quarter under review. Operating income surged 29% to $6.2 million during the reported quarter. A surge in total transactions contributed to the expansion of revenue and operating income. The total transactions spiked 25% over the last-year quarter to 7.9 million in the third quarter of 2012.

The company’s Corporate and Other reported total expenses of $6.6 million in the reported quarter. The decrease was attributable to lower stock-based compensation expenses.

Financial Position

Euronet Worldwide exited the third quarter of 2012 with cash in hand of $191.8 million, increasing from $178.6 million as of June 30, 2012. The increase was primarily due to healthy cash from operations and favorable changes in working capital in the epay segment, partially offset by repayment of borrowings made under the revolving credit facility.

Total debt obligation in the company’s books amounted to $261.6 million, decreasing from $321.4 million as of June 30, 2012.

Guidance

With the assumption of a constant foreign currency rate, the company guided the fourth quarter pre-tax cash earnings to be around 47 cents per share. Taxes, including federal alternative minimum tax and state income tax expense, are expected to be a maximum of 4 cents per share.

Peer Take

Euronet Worldwide competes closely with The Western Union Company (WU), which will report its third-quarter financial results after the closing bell on October 30, 2012. The Zacks Consensus estimate for Western Union’s third-quarter earnings currently stands at 45 cents per share, up 12% year over year.

Zacks Rank

Both Euronet Worldwide and its peer Western Union carry a Zacks #3 Rank, implying a short-term Hold.

 
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