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Why Hold Strategy is Apt for Western Union (WU) Stock Now

The Western Union Company WU is well-poised to grow on the back of its expanding digital platform, efficiency improvement initiative and expansion in the remittance market.

Western Union, with a market cap of $4 billion, is a leader in global money transfer and payment services. The company’s vast platform capabilities include digital and physical money movement networks 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.

Estimate Trend

The Zacks Consensus Estimate for Western Union’s 2023 earnings is pegged at $1.59 per share, which increased by a penny in the past 60 days. During this time, it has witnessed four upward estimate revisions and two downward movements. The company beat earnings estimates in two of the last four quarters, met once and missed on the other occasion, the average surprise being 8.6%.

The Western Union Company Price and EPS Surprise


The Western Union Company Price and EPS Surprise
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 stands at $4.1 billion.

Growth Drivers

The company actively pursues strategic alliances and partnerships to expand its geographical footprint and services offered. Its moves to strengthen operations in growing economies are expected to position the company for long-term growth. Earlier this year, WU partnered with one of the world’s largest retail chains, 7-Eleven Mexico, to ease cross-border money transfers in Mexico.

It is resuming money transfer services from the United States to Cuba in multiple phases. The company also collaborated with an Australian fintech Beforepay to enhance cross-border money transfers with a Send Now, Pay Later service. Innovative products like this will combine lending and remittance services and position Western Union for better penetration of the growing remittance market.

With the remittance market expected to grow rapidly in the coming years, the company’s constant efforts to expand its presence in emerging markets can increase its potential. Creating a seamless omnichannel digital experience for the customers is expected to boost its market share and capture a sizeable chunk of growth.

The company’s Evolve 2025 strategy intends to bring high-value and accessible financial services to address the growing demand for cross-border money transfers. The program is expected to enhance its efficiency and deliver mid-single-digit growth in the bottom line for 2024 and 2025.

WU’s shareholder-friendly moves are noteworthy. WU’s dividend yield of 8.8% is significantly higher than the industry average of 0.8%. Last year, Western Union returned around $713 million in capital to its shareholders. At 2022 end, the company had $648.2 million left under its share buyback program.

Key Concerns

There are a few factors that can hold the stock back. In the trailing 12 months, the free cash flow after dividends declined 85.2%. Also, WU’s total debt-to-total capital of 84.6% at the fourth-quarter end was higher than the industry’s figure of 40.6%. Its high leverage ratio is concerning. Nevertheless, we believe that a systematic and strategic plan of action will drive its long-term growth.

Key Picks

Meanwhile, investors interested in the broader Business Services space may look at players like Nayax Ltd. NYAX, International Money Express, Inc. IMXI and Remitly Global, Inc. RELY, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Herzliya, Israel-based Nayax operates a payment platform globally. The Zacks Consensus Estimate for NYAX’s 2023 earnings indicates a 54.4% year-over-year increase.

Headquartered in Miami, International Money Express offers money remittance services. The Zacks Consensus Estimate for IMXI’s 2023 earnings indicates a 24.3% year-over-year rise.

Based in Seattle, WA, Remitly Global is a digital financial services provider. The Zacks Consensus Estimate for RELY’s 2023 earnings suggests 5.9% year-over-year growth.

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