What happened
Shares of Euronet Worldwide (EEFT 0.21%) were down more than 20% as of 1:43 p.m. ET Wednesday after the payments company reported earnings results for the second quarter.
Revenue grew 11% year over year, which translated to operating profit growth of 21%. But management's earnings guidance for next quarter was below the Street's expectations.
So what
Euronet operates its digital and cash payments network in countries all over the world, so it is well positioned to grow as the global economy continues to shift toward greater use of digital payments. But this also means it can be vulnerable to near-term weakness in the economy.
In the second quarter, the company delivered record revenue and adjusted operating profit as it continued to realize solid margin expansion from the growing demand for money transfers and electronic fund transfers.
The money transfer segment is the company's largest, and it grew 7% year over year, with operating profit up 16%. Strong growth in international-originated money transfers and U.S.-outbound transactions was partially offset by a decline in its U.S. domestic business.
The company's fastest rate of growth was in its epay segment, with revenues up 16% year over year, powered by solid growth in digital branded payments. That segment had a few weaknesses, such as a 12% decline in transactions from India, but overall, the company's solid quarter was offset in the minds of investors by its weaker than expected guidance.
Now what
The market was spooked by third-quarter guidance for adjusted earnings of $2.70, which was below the consensus estimate of $3.06.
With the Nasdaq Composite up this year, Wall Street is looking for signs of strength to sustain the rally. Management may not have told investors what they wanted to hear in terms of its near-term outlook, but Euronet's long history of steady growth in the digital payment space should keep the stock moving higher over the next decade.
