The compliance cost increase will impact WU earnings by 10 to 20 cents per share per year, which is 2.5 to 5 cents per share per Q. (Source: management statements in last CC, fairly simple DD arithmetic against WU financials). The abrupt presentation of this cost increase, combined with the CFO departure, gave the whole announcement the air of something not fully anticipated or communicated internally. This suggests that management has been very conservative (self-penalizing) in its cost estimate announcement.
Let's assume worst-case as defined by management. 32 cents plus 5 cents is 37 cents (profit before that cost is incurred) which would be a middling to lackluster Q. MRQ was 39 cents with all the pricing cuts active! But WU performance has been overall uptrending since the pricing action, indeed despite the pricing action. So analysts are predicting a breakdown in earnings PLUS the maximum end of extra compliance expense. I just don't think that level of double-whammy pessimism is justified, given recent performance.
Profits for 2013 are likely to be about 1.50 per share. That's 37.5 cents per Q. I don't think management would have predicted flat profits for 2014 if results were going to start at 31 cents.
Compliance costs come in at 3.5% to 4.5% of revenue, add the price cuts from last year, and subtract the restructuring. 2014 brings flat income growth and fewer share repurchases with the potential of downside surprise. Good luck, I piled my WU capital into regional banks.
OK - here's your math: We agree on compliance costs, which (if you do the math) work out to 10 to 20 cents per share per year, which is 2.5 to 5.0 cents per share per Q. Price cuts from last year were in full force in 3Q, when EPS was 39 cents. I don't see any restructuring charge - you just threw that in there. The potential is for upside surprise as management was probably conservative with the compliance costs. 39 - 5 is 34 and that is with full price cuts remaining in effect (contrary to management plan). How do you get to 31 or 32?