We are downgrading our recommendation on The Western Union Co. (WU) to Underperform from Neutral following its third quarter earnings release, in which the company trimmed its full-year 2012 earnings expectations. The company slashed its earnings guidance to a range of $1.60-$1.63 per share from a previous estimate of $1.68-$1.72 per share.
Moreover, stiff competition and a weak global economy is taking a toll on its performance. Western Union is facing compliance-related issues, particularly those linked to its Southwest Border agreement. It has also recently witnessed challenges in its core retail money transfer business in certain key markets.
The company is also facing strong competition from electronic channels of money transfer. On the other hand, Western Union is also facing management issues. Given a host of headwinds, we expect the stock to remain under pressure in the near term.
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