Ahead of the June-quarter earnings release, slated for after the markets close on July 30, we are reiterating our Outperform rating on Cardtronics; our estimates remain unchanged and do not incorporate the recent debt deal ($0.02 accretive) and planned acquisition of Welch ATM (we estimate about $0.12 accretive in 2015, neutral to 2014). At William Blair’s 34th Annual Growth Stock Conference in mid-June, management expressed confidence in its ability to meet 2014 guidance, its pipeline of new business opportunities, and Cardtronics’ ability to add value to its ATMs and customers.
We believe strong June-quarter results’ upward pressure on estimates from the Welch deal, new product announcements, additional M&A, and somewhat lessened concern about the 7-Eleven contract should sustain recent momentum in the stock. For the June quarter, we estimate 20% revenue growth, to $249.5 million (versus the Street’s $250 million); 190 basis points of EBITDA margin compression, to 24.0%; and 13% adjusted EPS growth, to $0.55 (versus the Street’s $0.58). In addition to general investment, near-term margin pressure is driven by higher property taxes in the United Kingdom and higher hedging expense related to vault-cash funding. We anticipate withdrawal transactions to grow 20% year-over-year (versus 25% in the March quarter).
Our adjusted EPS estimates remain unchanged at $2.26 (versus guidance of $2.24- $2.29) for 2014 and $2.57 for 2015. While Cardtronics faces a difficult year-over-year comparison in the September quarter (Cardpoint acquisition, improving profitability in the United Kingdom, favorable business mix), we continue to believe guidance and our estimates are conservative, as Cardtronics has several growth opportunities (organic and inorganic) and margin expansion initiatives. Not accounting for the proposed acquisition of Welch ATM, for 2014, we estimate 13% revenue growth, to $994.5 million (versus guidance of $990 million to $1.1 billion), and 12% adjusted EBITDA growth, to $244.7 million (versus guidance of $239 million to $244 million).
For 2015, we assume 7% revenue growth (all organic) and 130 basis points of adjusted EBITDA margin expansion to 25.9%. Our estimates do not include unannounced acquisitions. We anticipate an update on the second-half rollout of new value-added services to its ATM network. While details remain vague, we expect initiatives are focused on loyalty, couponing, and mobile products/strategies. The key is to drive more transactions to the ATMs and more sales to the merchant partners, and to differentiate Cardtronics from other ATM providers. Management has been working on these initiatives for more than two years, and we believe a successful launch should better position the company to win new business.