Western Union Faces Macro Headwinds, Guggenheim Says After Q4 Print
The 2019 guidance announced Thursday by The Western Union Company (NYSE: WU) reflects a tough operating environment.
Although the company’s digital initiatives will generate revenue growth in the longer term, macro-related headwinds are likely to exert pressure on revenue growth in Europe and the Asia-Pacific region, according to Guggenheim.
The Analyst
Guggenheim’s Jeff Cantwell maintains a Neutral rating on The Western Union Co.
The Thesis
Western Union reported Q4 GAAP EPS of 48 cents, ahead of the estimate. The company’s GAAP revenue of $1.4 billion came in below expectations, with the EPS beat being driven by a lower tax rate, Cantwell said in a Friday note.
The adjusted operating margin expanded 130 basis points to 19.3 percent on the back of strong cost control. The financial services company announced a 5-percent hike in its quarterly dividend to 20 cents per share.
Western Union has launched digital initiatives in recent months that include partnerships with Amazon.com, Inc. (NASDAQ: AMZN) and TerraPay; the expansion of its digital money transfer services into Korea via the KakaoBank mobile app and its cross-border initiative with China's JD Digits.
The company has also launched digital services in Hong Kong, Singapore and Malaysia.
“We view these strategic initiatives positively and believe they will eventually generate incremental volume for WU over the longer-term; ultimately, we expect they can drive improvement in top-line and EPS growth for the company,” Cantwell said.
The analyst lowered the EPS estimates for 2019 and 2020 from $1.94 to $1.89 and from $2.04 to $2, respectively, to reflect a weaker macro environment.
Price Action
Western Union shares were up 0.75 percent at $18.14 at the time of publication Monday.
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Western Union Q4 Earnings Preview
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Photo by Joe Mabel/Wikimedia.
Latest Ratings for WU
Dec 2018 | Keefe Bruyette & Woods | Initiates Coverage On | Market Perform | |
Nov 2018 | Barclays | Initiates Coverage On | Underweight | |
Nov 2018 | Wells Fargo | Maintains | Market Perform | Market Perform |
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View the Latest Analyst Ratings
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