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Western Union (WU) Stock Down 5% Despite Q2 Earnings Beat

·5 min read

Shares of The Western Union Company WU have declined 4.9% since it reported second-quarter 2022 results on Aug 3. The quarterly results were hurt by discontinuation of operations across Russia and Belarus, which adversely impacted WU’s digital money transfer revenues, and a higher effective tax rate. Nevertheless, the downside was partly offset by decline in expenses in the quarter under review.

Q2 Results

Western Union reported second-quarter 2022 earnings per share of 51 cents, which outpaced the Zacks Consensus Estimate by 24.4%. The bottom line rose 6.3% year over year.

WU’s earnings gained momentum from improved operating margin and reduced share count.

Total revenues of $1,138 million slumped 12% year over year on a reported basis and 4% on a constant currency basis in the second quarter. The top line beat the Zacks Consensus Estimate by a whisker.

Adjusted operating margin expanded 310 basis points year over year to 23.3% on the back of changes in foreign currency, reduced compensation-related expenses and product mix.

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

Other Quarterly Results

Western Union’s total expenses decreased 16% year over year to $874.3 million, thanks to lower cost of services, and selling, general and administrative expenses.

The Consumer-to-Consumer (C2C) segment, that usually contributes the most to WU’s revenues, decreased 9% year over year on a reported basis and 6% on a constant currency basis in the quarter under review. Meanwhile, transactions slipped 13% year over year due to reduced transactions across Europe and CIS, North America and APAC.

Digital money transfer revenues fell 6% year over year on a reported basis and 3% on a constant currency basis. The metric accounted for 25% and 33% of overall C2C revenues and transactions, respectively.

Revenues of Westernunion.com dipped 1% year over year on a reported basis but inched up 1% on a constant currency basis. The revenue comprised 1% cross-border revenue growth.

Balance Sheet (as of Jun 30, 2022)

Western Union exited the second quarter with cash and cash equivalents of $1,201.9 million, which dipped 0.5% from the 2021-end level.

Borrowings declined 10.4% from the figure at the 2021-end to $2,695.3 million.

Total stockholders' equity of $448.3 million increased 26.1% from the level as of Dec 31, 2021.

During the six months ended Jun 30, 2022, net cash provided by operating activities fell 12.2% from the prior-year comparable period to $306.8 million.

Capital Deployment

Western Union rewarded $112 million to shareholders to the tune of $91 million through dividends and share buybacks of $21 million during the second quarter.

2022 Guidance Revised

Western Union altered its 2022 guidance, considering several factors such as the timing of expenses, better-than-expected cost management on a year-to-date basis and weaker top-line trends.

Adjusted revenues (constant currency, excluding the impact of Argentina inflation and proforma for the planned sale of Business Solutions) are now expected to witness mid-single-digit decline, while the previous view estimated the metric to witness low-single-digit decline.

Adjusted EPS is still anticipated within $1.75 and $1.85 for 2022. The mid-point of the guidance indicates 17.8% decline from the 2021 reported figure.

Operating profit margin is expected between 20% and 21%, up from the prior forecast of roughly 20%. The metric stood at 22.5% in 2021.

Zacks Rank

Western Union currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Business Services Sector Releases

Of the Business Services sector players that have already released second-quarter results so far, the bottom line of Mastercard Incorporated MA, Robert Half International Inc. RHI and Fiserv, Inc. FISV beat the Zacks Consensus Estimate.

Mastercard reported second-quarter 2022 earnings of $2.56 per share, which beat the Zacks Consensus Estimate by 8.5%. The bottom line climbed 31% year over year. Net revenues of Mastercard improved 21% year over year to $5.5 billion in the quarter under review. The top line outpaced the consensus mark by 4.3%. MA's gross dollar volume rose 14% year over year on a local-currency basis to $2.1 trillion in the second quarter.

Robert Half’s quarterly earnings of $1.6 per share beat the consensus mark by 0.6% and improved 20.3% year over year. RHI’s revenues of $1.86 billion missed the consensus mark by 1.8% but increased 17.9% year over year on a reported basis and 20% on an as-adjusted basis. Adjusted gross profit of Robert Half in the quarter was $804.1 million, up 20.2% year over year.

Fiserv reported adjusted earnings (excluding 64 cents from non-recurring items) per share of $1.56, which beat the consensus mark by 1.3% and increased 14% year over year. FISV’s adjusted revenues of $4.23 billion beat the consensus mark by 4.1% and increased 4.5% year over year. Organic revenue growth of Fiserv was 12% in the quarter, driven by a 17% surge in the Acceptance segment, a 7% increase in the Fintech segment and an 8% improvement in the Payments segment.

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