It has been about a month since the last earnings report for MoneyGram (MGI). Shares have lost about 57.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is MoneyGram due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
MoneyGram Tops Q3 Earnings Estimates, Lowers Guidance
MoneyGram International's third-quarter earnings of 24 cents per share beat the Zacks Consensus Estimate by 118% but remained unchanged year over year. A decline in expenses aided results.
MoneyGram's total revenues for the reported quarter were $347.2 million, down 13% on a reported basis and 12% on a constant currency, year over year. Revenues missed the Zacks Consensus Estimate by 8.9%.
Fees and other revenues decreased 56.4% to $333.7 million, while investment revenues increased 5.8% to $13.5 million.
Adjusted EBITDA margin of 17.1% remained flat year over year.
Total operating expenses declined by 14.7% year over year to $358.1 million.
In the Global Funds Transfer segment, money transfer revenues decreased 14% year over year to $304.2 million. Bill payment revenues also decreased 14% year over year to $17.4 million. Revenues include the impact of higher compliance standards and newly implemented corridor specific controls. MoneyGram.com revenues grew 3%. It was affected by enhanced compliance controls and introductory pricing.
Total digital solutions, which include MoneyGram.com, represented 16% of total money transfer revenues. Investment revenues benefited from higher yields and investment balances and grew 75% to $13.5 million.
The Financial Paper Products segment reported total revenues of $25.6 million, up 24% year over year due to a 9.4% uptick in money order revenues and a 46.8% increase in official check revenues. Adjusted operating margin improved 1480 basis points from the year-ago quarter to 37.5%.
As of Sep 30, 2018, MoneyGram had cash and cash equivalents of $208.8 million, up 9.8% from year-end 2017 levels. The company's total assets were $4.5 billion, down 5.2% from year-end 2017 levels. The company exited the second quarter with $902 million of outstanding debt, down 0.7% from year-end 2017 levels.
Adjusted free cash flow for the first nine months of 2018 was $79.9 million, up 19% year over year.
Guidance Revised Down
The company is revising its full-year estimates for 2018. Revenues are expected to decline approximately 10% on a constant currency basis (compared with the earlier estimate of growth between 7% and 9%). Adjusted EBITDA is expected to decline approximately 15% on a constant currency basis (compared with constant currency adjusted EBITDA growth projection in the range of 9-11%).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -108.7% due to these changes.
At this time, MoneyGram has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, MoneyGram has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.