Back to top

Analyst Blog

On Jul 11, we downgraded our recommendation on MoneyGram International Inc. (MGI - Analyst Report) to Underperform based on its bleak growth prospects amid the current economic headwinds and higher expenses.

Why the Downgrade?

On May 2, MoneyGram reported first-quarter 2013 earnings per share (EPS) of 24 cents. While EPS was in line with the Zacks Consensus Estimate, total revenue of $340.5 million missed the mark of $342 million. However, both EPS and revenues were higher than the year-ago numbers by 4.3% and 7%, respectively.

Higher transaction volumes and free cash flow were partially offset by lower investment income and higher operating and commission expenses, overall, reducing margins.

Following the first quarter results,the Zacks Consensus Estimate for both 2013 and 2014 have remained intact at $1.20 a share and $1.40 per share, respectively, over the last 60 days. Consequently, with the Zacks Consensus Estimate for 2013 and 2014 depicting no clear directional pressure on the stock in the near term, MoneyGram now has a Zacks Rank #3 (Hold).

Cause for Concern

MoneyGram’s investment portfolio has been consistently deteriorating given the low interest rate environment across economies. Moreover, increased coverage in different countries exposes the company to foreign currency fluctuations. Further, increased dependence on the money transfer business given the constant descent of the financial products segment is adversely affecting margins and operating cash flow.

At such a juncture, higher operating and commission expenses only add to the woes, thereby restricting EBITDA growth. Posting 5.8% growth in 2012, adjusted EBITDA also lagged management’s guidance of 7–9%, which has been further lowered to 3–6% for 2013.

Other Stocks to Consider

While we prefer to avoid MoneyGram until it gains some traction, other stocks that are outperforming in the financial sector include Moody’s Corp. (MCO - Analyst Report), American Safety Insurance Holdings Inc. and HCI Group Inc. (HCI - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
SUPER MICRO… SMCI 27.00 +10.25%
CANADIAN SO… CSIQ 38.34 +8.18%
BANCO DO BR… BDORY 16.78 +8.05%
CENTURY ALU… CENX 26.97 +7.97%
WILLDAN GRO… WLDN 11.38 +5.86%