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Why Euronet Worldwide Stock Jumped 10%

By Jordan Wathen – Jul 29, 2015 at 1:17PM

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Shares of the ATM servicer and money transfer company are jumping after smashing earnings expectations for the second quarter.

What: Shares of Euronet Worldwide (EEFT -0.75%) traded up by more than 10% after market open but have since settled into a respectable mid-day gain of 6%.

The company handily beat earnings estimates, reporting adjusted cash earnings per share of $0.78 compared to the consensus estimate of $0.70 per share.

So what: Euronet Worldwide's strong quarter owed largely to double-digit growth in its money transfer segment, which reported revenue growth of 33% year over year, or 44% on a constant-currency basis. It also reported a strengthening network of transfer points, with network locations growing 16% year over year to 272,000.

The company's high-margin electronic financial transactions unit also delivered, achieving revenue growth of 4%, or 22% on a constant-currency basis. It now operates 21,980 ATMs, up 14% from last year, either as a transaction processor (whereby it collects fees to handle ATM transactions) or as an owner and operator, which can generate better economics as it keeps more of the revenue for itself.

Now what: Any way you slice it, Euronet's results were impressive -- and doubly so, given that foreign-exchange headwinds hit all three of its business lines with double-digit impacts to revenue, operating income, and adjusted EBITDA. 

But currencies rise and fall, and often revert to the mean, allowing the earnings power of the business to ultimately shine through. Case in point: Euronet guided for adjusted cash earnings of $0.94 per share in the third quarter in the case that foreign exchange rates remain stable, which would be a 17.5% improvement over the third quarter of 2014.

Jordan Wathen has no position in any stocks mentioned. The Motley Fool recommends Euronet Worldwide. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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