WEX reports strong Q4; transportation ‘biggest drag’ on fleet segment

truck pulling out of fuel station

The trucking slowdown is providing a bit of a headwind at WEX Inc. (NYSE: WEX) even though the company continues to outperform financially.

The truck fleet payments and fuel card provider reported adjusted earnings per share (EPS) of $2.61, at the high end of management’s guidance range and 5 cents higher than the consensus estimate. The adjusted EPS result was 24% higher year-over-year.

WEX CEO Melissa Smith said that “2019 was another record year for WEX, capped off by an impressive fourth quarter driven by double-digit top-line growth and strong operating leverage.” 

WEX reported a 2.7% year-over-year increase in fleet solutions revenue at $261 million. Fleet transactions increased 9.3%, with gallons of fuel purchased by WEX’s customers climbing 6.1%. However, total fuel payments processed rose only 0.9% to $9.42 billion as the average fuel price declined 4.8% in the period.

WEX’s Key Performance Indicators

The late fee rate – revenue from late fees as a percentage of fleet fuel purchases – increased 21 basis points year-over-year to 0.65% as the gross amount of late fee revenue on fuel payments increased 51% to $62 million.

WEX reported that fleet credit losses stood at 18.5 basis points, with higher losses being reported in the small over-the-road fleets.

On the company’s Thursday morning earnings conference call, WEX CFO Roberto Simon said, “We continue to see challenges in the trucking market.”

Smith said that the “biggest drag” on fleet results came from the transportation segment.

The fleet solutions segment reported an 8.6% year-over-year increase in adjusted operating income at $137 million.

Stronger trends were seen across the entire company as consolidated revenue increased 15% year-over-year and adjusted operating income rose 25%.

“The fourth quarter built upon the momentum from earlier in the year, marked by robust transaction volume growth, strong performance from acquisitions, significant contribution from our previous contract signings and meaningful new contract wins,” stated Smith.

Full-year earnings guidance light of expectations

The company expects first-quarter 2020 revenue to be in the range of $445 million to $455 million with adjusted net income per share in the range of $2.15 to $2.25. This brackets the current consensus estimates of $451.2 million and $2.22, respectively.

WEX’s full-year 2020 guidance calls for revenue in the range of $1.86 billion to $1.9 billion, lower than the current consensus estimate of $1.95 billion. Adjusted net income per share is expected to be in the range of $10.15 to $10.55 compared to the current consensus estimate of $10.55.

Management said that the system failure that shut off fuel cards in early February is likely to have a very minimal impact on results.

WEX is an electronic payments provider offering fuel, corporate expense and health payments cards. The company’s fleet services include over-the-road fuel cards for trucking, fuel management, factoring, telematics and GPS fleet tracking.

Shares of WEX are up more than 2% on the day.

WEX Stock Price Chart – SONAR: STOCK.WEX