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Western Union (WU) Beats on Q2 Earnings, Narrows Outlook
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The Western Union Company (WU - Free Report) reported second-quarter 2016 operating earnings per share of 42 cents that surpassed the Zacks Consensus Estimate by 5%. Earnings also increased 17% year on year mainly due to strong growth in digital business and the U.S. money transfer business. Also, lower operating expenses supported the upside.
Total revenue of $1.4 billion declined 1% year over year on reported basis due to the adverse impact of a stronger U.S. dollar. Nonetheless, revenues increased 3% on a constant currency basis. Revenues marginally missed the Zacks Consensus Estimate.
Though the top-line growth was limited by a 3% decline in transaction fees, the adverse impact was offset by a 7% increase in other revenues and a 5% rise in foreign exchange revenues.
Western Union’s total expense decreased 2% year over year to $1 billion owing to a lower selling, general and administrative expenses.
Operating margin was 18.9% in the quarter compared with 18.1% in the prior-year quarter. This was due to the impact of foreign exchange and higher investment in technology, partially offset by reductions in compensation-related costs and other expenses.
Segment Update
The Consumer-to-Consumer segment, which is the main contributor to the company’s top line, reported a 1% decline in revenues to $1 billion due to lower transaction fees. Operating income declined 8.3% to $235.3 million. Westernunion.com revenues improved 19% on 25% increase in transactions and represented 8% of total segment’s revenue.
In the Consumer-to-Business segment, revenues declined 2% year over year to $154.2 million due to lower transaction fees. Operating income was $17.7 million in the quarter. The segment had incurred an operating loss of $6.4 million in year-ago quarter.
Business Solutions revenues increased 3.3% year over year to $100.8 million owing to solid growth in Europe. The segment reported operating income of $5.1 million in the quarter, rebounding from year ago loss of $0.4 million.
Financial Update
Cash and cash equivalents as of Jun 30, 2016 were $1.2 billion, down 8% from the 2015-end level.
Borrowing remained almost unchanged from the 2015-end level at $3.2 billion.
As of Jun 30, 2016, stockholders' equity was $1.3 billion, down 7.1% from year-end 2015.
Western Union generated cash flow from operating activities of $485.6 million in the first six months of 2016 compared with $465.7 million in the prior-year period.
Share Repurchase and Dividend Update
In the reported quarter, the company spent $78 million for share buybacks and $78 million as dividends, thereby returning $156 million to its shareholders.
In the second quarter, the company announced a quarterly cash dividend of 16 cents per common share, up 6.7% from the prior-year payout.
2016 Guidance
Western Union mostly provided its full-year outlook. However, the company slightly lowered its GAAP outlook, based on the negative movement of several foreign currencies against the U.S. dollar. The company expects low to mid-single-digit increase in revenues on a constant currency basis. GAAP revenues change is expected to be around 400 basis points lower than constant currency.
Impact of increased revenues on operating profit is expected to be partially offset by incremental hedge benefits. Hedge gains are now projected at $45 million instead of $40 million. The outlook for GAAP earnings per share has been narrowed to a range of $1.60–$1.70 from $1.58–$1.70 estimated previously. This primarily reflects the impact of lower effective tax rate and legal matter accrual.
The company expects cash flow from operating activities of about $1 billion. This outlook excludes about $100 million final tax payments related to the agreement announced with the U.S. Internal Revenue Service in Dec 2011. Either a portion or the entire payment is likely to be made in 2016.
Zacks Rank
Western Union currently carries a Zacks Rank # 4 (Sell).
Among other financial transaction services providers, the bottom line at American Express Co. (AXP - Free Report) , MoneyGram International and Visa Inc (V - Free Report) beat the respective Zacks Consensus Estimate for the quarter ending as of Jun 30, 2016.
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Western Union (WU) Beats on Q2 Earnings, Narrows Outlook
The Western Union Company (WU - Free Report) reported second-quarter 2016 operating earnings per share of 42 cents that surpassed the Zacks Consensus Estimate by 5%. Earnings also increased 17% year on year mainly due to strong growth in digital business and the U.S. money transfer business. Also, lower operating expenses supported the upside.
Behind The Headlines
Total revenue of $1.4 billion declined 1% year over year on reported basis due to the adverse impact of a stronger U.S. dollar. Nonetheless, revenues increased 3% on a constant currency basis. Revenues marginally missed the Zacks Consensus Estimate.
Though the top-line growth was limited by a 3% decline in transaction fees, the adverse impact was offset by a 7% increase in other revenues and a 5% rise in foreign exchange revenues.
Western Union’s total expense decreased 2% year over year to $1 billion owing to a lower selling, general and administrative expenses.
Operating margin was 18.9% in the quarter compared with 18.1% in the prior-year quarter. This was due to the impact of foreign exchange and higher investment in technology, partially offset by reductions in compensation-related costs and other expenses.
Segment Update
The Consumer-to-Consumer segment, which is the main contributor to the company’s top line, reported a 1% decline in revenues to $1 billion due to lower transaction fees. Operating income declined 8.3% to $235.3 million. Westernunion.com revenues improved 19% on 25% increase in transactions and represented 8% of total segment’s revenue.
In the Consumer-to-Business segment, revenues declined 2% year over year to $154.2 million due to lower transaction fees. Operating income was $17.7 million in the quarter. The segment had incurred an operating loss of $6.4 million in year-ago quarter.
Business Solutions revenues increased 3.3% year over year to $100.8 million owing to solid growth in Europe. The segment reported operating income of $5.1 million in the quarter, rebounding from year ago loss of $0.4 million.
Financial Update
Cash and cash equivalents as of Jun 30, 2016 were $1.2 billion, down 8% from the 2015-end level.
Borrowing remained almost unchanged from the 2015-end level at $3.2 billion.
As of Jun 30, 2016, stockholders' equity was $1.3 billion, down 7.1% from year-end 2015.
Western Union generated cash flow from operating activities of $485.6 million in the first six months of 2016 compared with $465.7 million in the prior-year period.
Share Repurchase and Dividend Update
In the reported quarter, the company spent $78 million for share buybacks and $78 million as dividends, thereby returning $156 million to its shareholders.
In the second quarter, the company announced a quarterly cash dividend of 16 cents per common share, up 6.7% from the prior-year payout.
2016 Guidance
Western Union mostly provided its full-year outlook. However, the company slightly lowered its GAAP outlook, based on the negative movement of several foreign currencies against the U.S. dollar. The company expects low to mid-single-digit increase in revenues on a constant currency basis. GAAP revenues change is expected to be around 400 basis points lower than constant currency.
Impact of increased revenues on operating profit is expected to be partially offset by incremental hedge benefits. Hedge gains are now projected at $45 million instead of $40 million. The outlook for GAAP earnings per share has been narrowed to a range of $1.60–$1.70 from $1.58–$1.70 estimated previously. This primarily reflects the impact of lower effective tax rate and legal matter accrual.
The company expects cash flow from operating activities of about $1 billion. This outlook excludes about $100 million final tax payments related to the agreement announced with the U.S. Internal Revenue Service in Dec 2011. Either a portion or the entire payment is likely to be made in 2016.
Zacks Rank
Western Union currently carries a Zacks Rank # 4 (Sell).
WESTERN UNION Price, Consensus and EPS Surprise
WESTERN UNION Price, Consensus and EPS Surprise | WESTERN UNION Quote
Performance of Other Stocks
Among other financial transaction services providers, the bottom line at American Express Co. (AXP - Free Report) , MoneyGram International and Visa Inc (V - Free Report) beat the respective Zacks Consensus Estimate for the quarter ending as of Jun 30, 2016.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7Best Stocks for the Next 30 Days. Click to get this free report >>