Update: Cardtronics Earnings

Aug.15.14 | About: Cardtronics, Inc. (CATM)

Summary

The company beat 2Q consensus on the top and bottom lines.

The company is still using an acquisition strategy for growth, but its free cash flow remains strong.

Its 2014 guidance is right in line with where we saw the company performing.

Cardtronics (NASDAQ:CATM) posted 2Q earnings of $0.61 a share (beating $0.58 consensus) and revenues of $260 million (above $250 million consensus). Shares are up nearly 20% over the last month on the news. Full year 2014 EPS guidance is still between $2.28 and $2.32, right in line with consensus. However, for 2Q, revenues were up 25% y/y, EBITDA up 20% y/y and net income up 20% y/y.

Since we first covered the company back in February, shares are down 4%. At the time, we found fair value to be $50, suggesting there's still 30% upside. It now trades at 15x next year's earnings and has a 6.6% free cash flow yield. As we noted in February,

The other aspect that'll drive the top line is the convenience aspect. This involves getting its ATMs in more stores. The company got a big contract win with Costco last quarter and it has some of the biggest companies in the world as customers, including Costco, Kroger, Walgreen, CVS, JPMorgan Chase, Bank of America and Citigroup. I'd look for the company to get more aggressive on getting contract wins with other global companies.

The company continues to be aggressive, buying up Welch ATM last quarter and inking a deal with Petro-Canada to provide services for more 500 locations in Canada. Also in the quarter it added 375 CVS locations, 240 BI-LO locations, 116 Kroger locations, 167 Fresh & Easy locations and 200 locations in the U.K. with Central England Co-op.

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