WEX Buffeted By Macro Headwinds

In the commercial card realm, some companies are more exposed to macro headwinds than others.

Consider the case of WEX Inc., which operates in corporate payments and specifically in fleet management, as well as other areas. Declining fuel prices, of course, hit the company’s top line, with a number of other factors coming into play to have a “beat” in the quarter but a “miss” on guidance. On Monday (Feb. 8), the stock was hammered by as much as 17 percent intraday during a tough day for, well, any publicly traded equity. WEX shares recovered a bit, along with the broader indices, to end well off lows for the session.

The headline numbers: Adjusted earnings per share came in at $1.15, well above The Street at $1.04, and revenues of $212 million again topped consensus of $204 million.

The fleet card business had 7 percent transaction growth in the year-over-year timeframe and grew to 17 countries. Management noted on the earnings call that the acquisition of Electronic Fund Source remains in process for North America, with regulators having come back with a request for more information; management said this is an event that had been anticipated.

In an interview before the earnings call but after earnings were released, WEX CEO Melissa Smith told PYMNTS that international areas saw continued, strong growth, driven by Europe and with notable relative outperformance in areas such as Brazil, which saw 11 percent payment processing transaction growth in the full year.

Looking ahead, the executive stated that through 2016 and beyond, the company would look to broaden its product base, with an eye toward international expansion, both organically and through acquisitions.

Regionally speaking, Smith said the Asia region — beyond Australia (with 8 percent growth year on year), where the company has been for some time — where new markets have been unfolding for WEX in China, Singapore and Thailand, has been seeing strong demand in the travel card segments (which, as a total unit, accounts for 7 percent growth of the top line), and 40 percent of the company’s travel volume remains outside of the United States.

Though the trends for longer-term growth remain intact and organic growth should be seen this year — with 10 percent as a targeted number continuing to hold steady — management, nonetheless, gave the nod to macro headwinds, such as fuel prices and FX, which will cut into top line numbers. Thus, the guidance of $860 million to $890 million on revenues slips below the $907 million that had been held coming into the call. To get an idea of how fuel prices impact results, Smith said on the earnings call that each dime in fuel prices translates into a $0.16 change in adjusted net income. And, with guided earnings in at $3.80 to $4.10, below consensus at $4.13, the stock was punished by 10 percent on the day.

Smith told PYMNTS that, particularly for China, there is “an overwhelming market need” for travel agencies to scale rapidly, offering evidence that demand in this segment has been trumping macro concerns in the region. Overall, travel should continue to see mid-teens percentage growth in 2016. Other growth areas, Smith told PYMNTS, will come from the health care business in the United States.