Earnings Miss: WEX Inc. Missed EPS By 24% And Analysts Are Revising Their Forecasts

Last week, you might have seen that WEX Inc. (NYSE:WEX) released its first-quarter result to the market. The early response was not positive, with shares down 6.0% to US$217 in the past week. Statutory earnings per share fell badly short of expectations, coming in at US$1.55, some 24% below analyst forecasts, although revenues were okay, approximately in line with analyst estimates at US$653m. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for WEX

Following the latest results, WEX's 14 analysts are now forecasting revenues of US$2.75b in 2024. This would be a credible 6.1% improvement in revenue compared to the last 12 months. Per-share earnings are expected to jump 49% to US$9.41. Before this earnings report, the analysts had been forecasting revenues of US$2.74b and earnings per share (EPS) of US$10.23 in 2024. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.

The consensus price target held steady at US$254, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values WEX at US$285 per share, while the most bearish prices it at US$220. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that WEX's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 8.2% growth on an annualised basis. This is compared to a historical growth rate of 12% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.2% annually. So it's pretty clear that, while WEX's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, they also reconfirmed their revenue numbers, suggesting that it's tracking in line with expectations. Additionally, our data suggests that revenue is expected to grow faster than the wider industry. The consensus price target held steady at US$254, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on WEX. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple WEX analysts - going out to 2026, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 1 warning sign for WEX that you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.