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Western Union (WU) Q4 Earnings & Revenues Beat Estimates

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The Western Union Co.'s (WU - Free Report) fourth-quarter 2020 earnings of 45 cents per share surpassed the Zacks Consensus Estimate by 7.14%. The bottom line also inched up 18.4% year over year.

Earnings declined year over year due to revenue weakness, partly offset by a lower effective tax rate, productivity and cost savings, and lower share count.

 

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 $1.27 billion beat the Zacks Consensus Estimate by 0.74%. However, the top line dipped 2.8% year over year. Revenues were weighed down by the continuing macroeconomic impact from COVID-19, partially offset by the strength in digital money transfer, which grew 36% to a new quarterly high of $240 million.

Total expenses of $1.04 million fell 3% year over year owing to reduced selling, general and administrative expenses.
Adjusted operating margin was 18.8%, up 10 basis points year over year.

Margin expansion was primarily driven by productivity savings and additional cost savings related to the effect of the COVID-19 pandemic, partially offset by weak revenues.

EBITDA margin of 22.3% was down 10 basis points year over year.

Consumer to Consumer (C2C)

Revenues of $1.12 billion were flat year over year on constant currency (CC) as well as on a reported basis. Total transactions increased 6%.
Digital money transfer revenues were up 35% year over year. Within the digital money transfer business, westernunion.com revenues jumped 27% reportedly and 26% at cc.

Operating income of $229.6 million inched up 1% year over year.
Operating margin expanded 20 basis points year over year to 20.5%.

Business Solutions

Revenues of $86.8 million deteriorated 8% on a reported basis or 11% on constant currency basis, primarily due to the ongoing macroeconomic issues stemming from the COVID-19 impact on small and medium-sized enterprises, travel and tourism, and education.

The segment reported an operating loss of $0.2 million against an operating income of $11 million in the year-ago quarter. Operating margin was a negative 0.2% in fourth-quarter 2020 against 11.3% in the fourth quarter of 2019.

Balance Sheet (as of Dec 31, 2020)

Cash and cash equivalents were $1.43 billion, down 1.5% from the level at 2019 end.

Borrowings dipped 5.9% to $3.06 billion from the level at 2019 end.
Stockholders' equity of $186 million as of 2020 end came against the deficit of $39.5 million at 2019 end.

Decrease in Cash Flow From Operations

Cash flow from operating activities was $877.5 million in 2020, down 4% year over year.

Resumption of Share Buyback

The company resumed share repurchases in the first quarter of 2021 and made a 4% increase in the quarterly dividend.

2021 Outlook

The company expects its current-year digital revenues to reach approximately $1 billion in 2021. It anticipates the business to continue improving in 2021 and thus expects mid-single digit constant currency revenue growth and EPS in the range of $2-$2.10.

Zacks Rank and Stocks to Consider

The Western Union carries a Zacks Rank #3 (Hold), currently. Some better-ranked stocks in the same space are Diebold Nixdorf, Incorporated (DBD - Free Report) , The Cardtronics PLC and WEX Inc. (WEX - Free Report) , each carrying a Zacks Rank #2 (Buy), presently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

The Zacks Consensus Estimate for 2021 earnings of Diebold Nixdorf, Cardtronics and WEX Inc. is pegged at 193.8%, 12.9% and 35.1% growth, respectively.

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