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Western Union (WU) Q3 Earnings Beat, Revenues Miss Estimates

Sapna Bagaria

The Western Union Company WU reported third-quarter 2019 operating earnings of 49 cents per share, beating the Zacks Consensus Estimate by 1.43% but down 6.1% year over year.

Behind the Headlines

Total revenues of $1.3 billion missed the Zacks Consensus Estimate by 0.5% but were up 4% on a constant-currency basis. Weakening of Argentine Peso led to a 2% decline in revenues, which was partly offset by positive effects of inflation in the company’s Argentina-based business by 2%.

The Western Union Company Price, Consensus and EPS Surprise

The Western Union Company Price, Consensus and EPS Surprise
The Western Union Company Price, Consensus and EPS Surprise

The Western Union Company price-consensus-eps-surprise-chart | The Western Union Company Quote


Total operating expense of $1.11 billion was up 2% year over year due to a higher selling, general and administrative expenses.

Segment Update

Consumer-to-Consumer (C2C)

Revenues of $1.11 billion increased 1% on a reported basis and 2% on a constant-currency basis. Total transactions grew 2%, driven by strength at westernunion.com. Growth was driven by cross-border sends originated in the United States and Latin America, as well as improvement in the Middle East, partially offset by declines in Asia Pacific and U.S. domestic money transfer.

Operating income of $263.8 million declined 5% year over year.

Revenues from westernunion.com C2C improved 16% on a reported basis and 17% on a constant-currency basis. Notably, westernunion.com represented 14% of total C2C revenues in the reported quarter.

Business Solutions

Revenues of $100.6 million was flat on a reported basis, but increased 3% in constant currency, driven by strong performance generated from customers in Europe.

The segment reported operating income of $16.7 million, up 18% year over year.

Balance Sheet (As of Sep 30, 2019)

Cash and cash equivalents were $1.4 billion, up 43% from year-end 2018 level.

Borrowings declined nearly 5.4% from the year-end level to $3.25 billion.
Stockholders' equity was a deficit of $19.7 million, compared with deficit of $309.8 million at year-end 2018 level.

At the end of the quarter, the company generated net cash of $665.3 million from operations, up 28.3% from year-end 2018 level.

2019 Guidance Update

The company expects low single-digit revenue growth (on a constant-currency basis), adjusted operating margin of approximately 20%, EPS in a range of $1.7 to $1.8 and cash flow of approximately $950 million from operating activities.

Long-Term Outlook

As a result of the strategic plans, Western Union established three-year financial targets, including an approximately 23% operating margin in 2022 and low double-digit earnings per share CAGR through 2022, compared with its 2019 adjusted EPS outlook.

Western Union carries a Zacks Rank #3 (Hold). Among the other players in the same space, MoneyGram International Inc. MGI missed the estimate by 175% while PayPal Holdings, Inc. PYPL and Euronet Worldwide, Inc. EEFT beat estimates by 17.3% and 1.43%, respectively.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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