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MoneyGram's Growth Strategy Impresses, Competition a Drag

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On Oct 17, 2016, we issued an updated research report on MoneyGram International Inc. .

This internationally renowned payment processor remains focused on remaining digitally updated. It has made substantial investments in digital/self service solutions like moneygram.com, mobile solutions, account deposit and kiosk-based services, which have not only boosted its revenues but also contributed to the diversification of its product lines.

The company has put in efforts to expand its digital footprint across the world.In fact, the company has substantial presence in markets with high growth potential like Latin America, Russia, the Asia Pacific, Africa, Western and Eastern Europe. MoneyGram has also expanded its presence to several unexplored and underdeveloped global markets, such as the Middle East, South America, Vietnam and Myanmar. Business moves like introduction of MGiAlloy, account deposit services in China and M-PESA wallets in Kenya deserve special mention.

The company also engages in strategic mergers, acquisitions, and spin-offs to bolster inorganic growth. The recent merger with Wal-Mart Stores Inc. (WMT - Free Report)

 is a notable business tactic in this regard. The company boasts a wide agent network as well by virtue of its partnership with several post offices, numerous national banks and stores globally.

However, MoneyGram’s operating revenues are exposed to global instability. In addition, increased commission, operating expenses, foreign exchange volatility as well as compliance spending exert pressure on operating margins. Economic and geopolitical issues in Saudi Arabia, Libya, and Angola, which used to strong markets for Moneygram, are now adversely affecting the company’s operations. As a result, the company has been incurring significant losses from these regions.

We note that MoneyGram delivered positive earnings surprise in each of the last four quarters with an average beat of 15.31%. Regular implementation of advanced technologies has facilitated the company in positioning its brand well among other industry leaders like Western Union Company (WU - Free Report) , Euronet Worldwide, Inc. (EEFT - Free Report) ,  to name a few.

Moneygram is scheduled to release third-quarter earnings before the market opens on Oct 28 and the Zacks Consensus Estimate is pegged at 15 cents. However, our proven model cannot conclusively say if the company will beat or miss earnings. This is because though Zacks Rank #3 (Hold) increases the predictive power of a beat, when combined with ESP of 0.00% makes prediction difficult. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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