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Western Union (WU) Q4 Earnings & Revenues Miss Estimates

Zacks Equity Research

The Western Union Company WU reported fourth-quarter 2019 operating earnings of 38 cents per share, missing the Zacks Consensus Estimate by 11.6%. The bottom line also declined 22.4% year over year.

The downside resulted from increased tax rate, higher marketing investment and adverse impacts of the divestiture of Speedpay and Paymap businesses in May 2019.

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

Behind the Headlines

Total revenues of $1.3 billion missed the Zacks Consensus Estimate by 1% but were up 3% 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 1%.

Total expenses of $1.11 billion were down 4% year over year due to reduced cost of services.

Segment Update

Consumer-to-Consumer (C2C)

Revenues of $1.13 billion remained flat on a reported basis and increased 1% on a constant-currency basis. Total transactions declined 1%. Growth was driven by cross-border sends originated in Europe, the United States and Latin America, partially offset by declines in the Asia Pacific, U.S. domestic money transfer and some countries dealing with civil unrest, macro-economic, and market-specific issues.

Operating income of $228.1 million declined 13% year over year.

Revenues from westernunion.com C2C improved 17% on a reported basis and 18% on a constant-currency basis. Notably, westernunion.com represented 15% of total C2C revenues in the reported quarter.

Business Solutions

Revenues of $97 million were flat on a reported basis but increased 1% in constant currency, driven by strong performance in Europe.

The segment reported operating income of $11 million, up 111.5% year over year.

Balance Sheet

Cash and cash equivalents (as of Dec 31, 2019) were $1.5 billion, up 49% from that at the end of 2018.

Borrowings declined nearly 6% from the year-end level to $3.23 billion.

Stockholders' equity was a deficit of $39.5 million compared with a deficit of $309.8 million at the end of 2018.

At the end of the quarter, the company generated net cash of $914.6 million from operations, up 11.4% from the end of 2018.

Dividend Hike

Owing to the company’s promising 2020 outlook, with respect to margin expansion and adjusted EPS (earnings per share) growth, Western Union raised its quarterly dividend by 13% to 22.5 cents  per common share. The dividend will be paid out on Mar 31, 2020, to shareholders of record at the close of business on Mar 17, 2020.

2020 Guidance Update

The company expects low-single-digit revenue growth (on a constant-currency basis), adjusted operating margin of 21%, adjusted EPS of $1.95-$2.05 and adjusted cash flow of $1 billion from operating activities.

Long-Term Outlook

The company affirmed its previously established three-year (2019-2022) financial targets, which includes approximately 23% operating margin and low-double-digit EPS (CAGR).

Zacks Rank & Stocks to Consider

Western Union currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the same space are Envestnet, Inc. ENV, Mastercard Incorporated MA and International Money Express, Inc. IMXI. While International Money sports a Zacks Rank #1 (Strong Buy) at present, the other two carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Envestnet, Mastercard and International Money beat earnings estimates in the last reported quarter by 3.45%, 4.81% and 19.05%, respectively.

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