MoneyGram (MGI) Down 31.6% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for MoneyGram (MGI). Shares have lost about 31.6% 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 the most recent earnings report in order to get a better handle on the important catalysts.

MoneyGram Q4 Earnings Beat, Revenues Miss Estimates

MoneyGram’s fourth-quarter 2019 adjusted income per share of 1 cent, which compared favorably with the Zacks Consensus Estimate of a loss of 2 cents. The metric was in line with the year-ago quarter figure.

MoneyGram’s results reflect transaction growth outside the United States.

Quarterly Details

The company’s total revenues of $323.7 million declined 6% year over year and missed the Zacks Consensus Estimate by 1.3%. The downside mainly resulted from a decline in fee and other revenues along with investment revenues.

Among the components of revenues, fees and other revenues declined 6.2% to $311.3 million, while investment revenues declined 11.4% to $12.4 million.
Adjusted EBITDA of $57.6 million declined 4% year over year.

Adjusted EBITDA margin of 17.8% improved 40 basis points year over year.
Total operating expenses declined 6% year over year to $311 million due to lower total commissions and direct transaction expenses, expenses related to transaction and operations support, expenses related to occupancy, equipment and supplies, and depreciation & amortization expenses.

Segments in Detail

In the Global Funds Transfer segment, money transfer revenues decreased 6.3% year over year to $299.7 million. Within the segment, money transfer revenues declined 5.6% year over year to $285.9 million and Bill payment revenues were also down by 17.9% year over year to $13.8 million. Operating margin deteriorated 30 basis points from the year-ago quarter to 1.8%.

The Financial Paper Products segment reported total revenues of $24 million, down nearly 8% year over year due to a 9.5% decline in money order revenues and a 6.5% decrease in official check revenues. Operating margin improved 150 basis points from the year-ago quarter to 33.3%.

Liquidity

The company ended 2019 with cash and cash equivalents balance of $146.8 million, up 0.9% from the 2018 end-level.

During the quarter, the company generated adjusted free cash flow of $19.8 million, down 6.2% year over year.

As of Dec 31, 2019, its pension liability was up 1.2% from the 2018-end level to $77.5 million.

Yearly Update

For 2019, adjusted diluted income per share was 3 cents per share on a reported basis.

For the year, total revenues of $1,285.1 million decreased 11% on a reported basis and 10% on a constant currency basis.

Global Funds Transfer segment’s revenues were $1,183.3 million, down 12.2% from the 2018-end level.

Adjusted EBITDA of $213.7 million declined 13% on a reported basis and decreased 11% on a constant currency basis.

Adjusted free cash flow totaled $62.4 million, down 38.2% from the 2018-end level.

1Q20 Guidance

On a constant currency basis, the company estimates total revenues of $300 million and adjusted EBITDA of $50 million for the first quarter of 2020.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 22.22% due to these changes.

VGM Scores

At this time, MoneyGram has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

MoneyGram has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.