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Western Union (WU) Beats on Q3 Estimates, Ups EPS Outlook
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The Western Union Company (WU - Free Report) reported third-quarter 2018 operating earnings per share of 54 cents, which beat the Zacks Consensus Estimate by 8.33%. However, the bottom line declined by a cent year over year.
Behind the Headlines
Total revenues of nearly $1.4 billion declined 1% on a year-over-year basis but increased 3% on a constant currency basis. Weakening of Argentine Peso led to a decline in revenues but increase in revenue per transaction in the company’s Argentina-based businesses aided the top line.
Western Union generated operating income of $302.6 million, up nearly 11% year over year.
The Western Union Company Price, Consensus and EPS Surprise
Adjusted operating margin of 21.8% improved 240 basis points (bps) year over year.
Total operating expense of $1.09 billion was down 4% year over year.
Segment Update
Consumer-to-Consumer (C2C)
Revenues for the segment remained unchanged on a reported basis and increased 2% on constant currency to $1.11 billion, led by higher transactions. Total transactions grew 4%, driven by strength at westernunion.com.
Revenues from westernunion.com C2C improved 19% on a reported basis and 20% on a constant currency basis. Revenues rose on the back of 23% transaction growth. Notably, westernunion.com represented 12% of total C2C revenues in the quarter under review.
Operating income increased 7% year over year to $277.8 million. Operating margin expanded 160 bps to 25.1%.
Business Solutions
Revenues decreased 1% on a normal basis and 3% on a constant currency basis year over year to $100.2 million.
The segment’s operating income of $14.1 million, increased 57% year over year.
Its operating margin improved 510 bps year over year to 14.2%.
Other
Other segment primarily consists of the U.S. and Argentina bill payments businesses. Revenues slipped 9% but increased 7% on a constant currency basis to $180.2 million.
Operating income declined 49% to $10.5 million and operating margin contracted 460 bps to 5.9%, both on a year-over-year basis.
Balance Sheet
Cash and cash equivalents as of Sep 30, 2018 were $767.6 million, down 8.5% from 2017-end level.
At quarter-end, borrowings rose nearly 8.6% from year-end 2017 to $3.3 billion.
As of Sep 30, 2018, stockholders' equity was a deficit of $415.3 million compared with stockholder’s equity deficit of $491.4 million at year-end 2017.
Net cash from operations totaled $518.5 million compared with $423.1 in the comparable period last year.
Share Repurchase & Dividend Update
In the reported quarter, the company returned $84 million in dividends and $100 million in share buybacks to its shareholders.
2018 Guidance Update
The company kept unchanged the guidance related to revenues, operating margin and cash flow. It expects revenue growth between low single-digit (on a GAAP basis) and low to mid-single digit in constant currency, operating margin of approximately 20%.
Earnings per share guidance was raised. The company expects GAAP EPS in a range of $1.85 to $1.92 (previously $1.82 to $1.92) and adjusted EPS in a range of $1.88 to $1.95 (previously $1.80 to $1.90).
Among other Financial Transaction Services providers, American Express Inc. (AXP - Free Report) , Total System Services, Inc. and Alliance Data Systems Corp. came out with flying colors as the bottom line of each beat the respective Zacks Consensus Estimate in the third quarter.
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Western Union (WU) Beats on Q3 Estimates, Ups EPS Outlook
The Western Union Company (WU - Free Report) reported third-quarter 2018 operating earnings per share of 54 cents, which beat the Zacks Consensus Estimate by 8.33%. However, the bottom line declined by a cent year over year.
Behind the Headlines
Total revenues of nearly $1.4 billion declined 1% on a year-over-year basis but increased 3% on a constant currency basis. Weakening of Argentine Peso led to a decline in revenues but increase in revenue per transaction in the company’s Argentina-based businesses aided the top line.
Western Union generated operating income of $302.6 million, up nearly 11% year over year.
The Western Union Company Price, Consensus and EPS Surprise
The Western Union Company Price, Consensus and EPS Surprise | The Western Union Company Quote
Adjusted operating margin of 21.8% improved 240 basis points (bps) year over year.
Total operating expense of $1.09 billion was down 4% year over year.
Segment Update
Consumer-to-Consumer (C2C)
Revenues for the segment remained unchanged on a reported basis and increased 2% on constant currency to $1.11 billion, led by higher transactions. Total transactions grew 4%, driven by strength at westernunion.com.
Revenues from westernunion.com C2C improved 19% on a reported basis and 20% on a constant currency basis. Revenues rose on the back of 23% transaction growth. Notably, westernunion.com represented 12% of total C2C revenues in the quarter under review.
Operating income increased 7% year over year to $277.8 million. Operating margin expanded 160 bps to 25.1%.
Business Solutions
Revenues decreased 1% on a normal basis and 3% on a constant currency basis year over year to $100.2 million.
The segment’s operating income of $14.1 million, increased 57% year over year.
Its operating margin improved 510 bps year over year to 14.2%.
Other
Other segment primarily consists of the U.S. and Argentina bill payments businesses. Revenues slipped 9% but increased 7% on a constant currency basis to $180.2 million.
Operating income declined 49% to $10.5 million and operating margin contracted 460 bps to 5.9%, both on a year-over-year basis.
Balance Sheet
Cash and cash equivalents as of Sep 30, 2018 were $767.6 million, down 8.5% from 2017-end level.
At quarter-end, borrowings rose nearly 8.6% from year-end 2017 to $3.3 billion.
As of Sep 30, 2018, stockholders' equity was a deficit of $415.3 million compared with stockholder’s equity deficit of $491.4 million at year-end 2017.
Net cash from operations totaled $518.5 million compared with $423.1 in the comparable period last year.
Share Repurchase & Dividend Update
In the reported quarter, the company returned $84 million in dividends and $100 million in share buybacks to its shareholders.
2018 Guidance Update
The company kept unchanged the guidance related to revenues, operating margin and cash flow. It expects revenue growth between low single-digit (on a GAAP basis) and low to mid-single digit in constant currency, operating margin of approximately 20%.
Earnings per share guidance was raised. The company expects GAAP EPS in a range of $1.85 to $1.92 (previously $1.82 to $1.92) and adjusted EPS in a range of $1.88 to $1.95 (previously $1.80 to $1.90).
Zacks Rank and Performance of Other Stocks
Western Union carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Among other Financial Transaction Services providers, American Express Inc. (AXP - Free Report) , Total System Services, Inc. and Alliance Data Systems Corp. came out with flying colors as the bottom line of each beat the respective Zacks Consensus Estimate in the third quarter.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>