WEX Posts Another Strong Quarter With Upside

wex

WEX reported solid fourth-quarter results. Revenue grew 15% year-over-year and 8% from the prior quarter, to $182 million, and was above our estimate of $178 million and consensus of $177 million. Fourth-quarter adjusted EPS, excluding stock comp expense, were $1.17, above our $1.11 estimate. Including stock comp, adjusted EPS were $1.13, versus our $1.07 estimate, exceeding the top end of management guidance by $0.01. The upside was driven by a combination of faster revenue growth and higher margins than we had forecast.

This was the first conference call for Melissa Smith as CEO. She discussed broader longterm strategies for the company, which include more of a focus on acquisitions that would be larger than those WEX has done historically. She also provided long-term growth targets of 10% to 15% on the top line and 15% to 20% on the bottom line, including acquisitions.

OPS purchase volume growth accelerated to 32% from 24% in the prior quarter. The online travel sector has been the key driver to growth in the OPS segment. The OPS segment represented a record 27% of revenue in the quarter, up from only 7% in 2008, with the vast majority of the growth being organic.

WEX’s 2014 adjusted EPS guidance is a range of $4.70 to $4.90, which brackets the consensus estimate of $4.80. The guidance includes $0.25 to $0.33 per share of unusual investment expense to prepare for the integration of the Esso acquisition. Our estimate includes a $0.30 per share hit from the acquisition-related investment expenses. The revenue guidance range of $751.0 million-$771.0 million for 2014 was below our estimate of $774.6 million.

We are reducing our 2014 revenue estimate to $755 million from $775 million, partly because of a reduction in pass-through revenue (no margin) related to cross-border fees and partly because of slightly lower interchange and discount fees as volume incentives expire. We remind investors that WEX has historically been conservative with its guidance.

 

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