Compelling Reasons to Hold Western Union (WU) Stock Now
The Western Union Company WU is set to capitalize on Evolve 2025's momentum, transaction expansion and a growing remittance market. The company's strong digital presence stands to benefit from the accelerating digitization of global economies.
Western Union — with a market cap of $4.3 billion — is a leader in global money transfer and payment services. Based in Denver, CO, the company’s vast platform capabilities connect people across more than 200 countries and territories. It supports money flows in around 130 currencies. Courtesy of solid prospects, this Zacks Rank #3 (Hold) stock is worth holding on to at the moment.
Let’s delve deeper.
The Zacks Consensus Estimate for Western Union’s 2023 earnings is pegged at $1.73 per share, which increased 1.2% in the past 60 days. During this time, it has witnessed six upward estimate revisions and no downward movements. The company beat earnings estimates in three of the last four quarters and missed once, the average surprise being 18%.
The Western Union Company Price and EPS Surprise
The Western Union Company price-eps-surprise | The Western Union Company Quote
The consensus estimate for 2023 revenues is $4.3 billion, supported by an expected increase in transactions. We project a 0.7% year-over-year rise in C2C transactions for 2023. The ongoing digital transformation initiatives are positively impacting results, with further growth potential ahead.
The company’s success in executing its digital transformation moves will also help it to sustain its lucrative dividend performance. Its dividend yield of 7.9% is much higher than the industry average of 0.7%. It returned $263.3 million to its shareholders in the form of dividends in the first nine months of 2023. Also, during this time, it repurchased shares worth $100 million. As of Sep 30, 2023, it had $548.2 million share repurchase authorization left through 2024-end.
Proactively forging strategic alliances and partnerships, Western Union broadens its geographic reach and service portfolio. By fortifying operations in growing economies, it anticipates laying the foundation for sustained long-term growth. The company's emphasis on innovative products, such as Send Now, Pay Later services that integrate lending and remittance, positions WU for enhanced market penetration in the growing remittance sector.
The company's Evolve 2025 strategy aims to provide high-value and accessible financial services to meet the increasing demand for cross-border money transfers. This initiative is anticipated to improve efficiency and contribute to mid-single-digit growth in the bottom line for 2024 and 2025. The company is implementing this plan by utilizing its retail presence as a gateway.
Key Concerns
There are a few factors that can hold the stock back.
As of Sep 30, 2023, its outstanding debt reached $2.3 billion, contributing to a total debt-to-total capital ratio of 79% at the third quarter-end, surpassing the industry average of 42.2%. The company's elevated leverage ratio raises concerns.
Also, in the trailing 12-month period, WU experienced a 0.7% decline in net cash from operations, following a 44.4% drop in 2022. Nevertheless, we believe that a systematic and strategic plan of action will drive the company’s long-term growth.
Key Picks
Meanwhile, investors interested in the broader Business Services space may look at players like Shift4 Payments, Inc. FOUR, FirstCash Holdings, Inc. FCFS and RB Global, Inc. RBA. While Shift4 Payments currently sports a Zacks Rank #1 (Strong Buy), FirstCash and RB Global carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Shift4 Payments’ current year earnings is pegged at $2.92 per share, which indicates 110.1% year-over-year growth. Allentown, PA-based FOUR beat earnings estimates in all the past four quarters, with an average surprise of 25%.
The Zacks Consensus Estimate for FirstCash’s current year bottom line indicates 13.1% year-over-year growth. Headquartered in Fort Worth, TX, FCFS beat earnings estimates in all the past four quarters, with an average surprise of 7.9%.
The Zacks Consensus Estimate for RB Global’s current year bottom line suggests 15.4% year-over-year growth. Based in Westchester, IL, RBA beat earnings estimates in each of the past four quarters, with an average surprise of 18.9%.
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