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Western Union (WU) Q2 Earnings Beat Estimates, Fall Y/Y

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The Western Union Co. (WU - Free Report) second-quarter 2020 operating earnings of 41 cents per share surpassed the Zacks Consensus Estimate by 13.89%. However, the bottom line was down 8.9% year over year.

The year-over-year earnings decline was due to revenue declines associated with the COVID-19 pandemic and lost earnings from the 2019 divestitures, partially offset by productivity savings, additional cost-management measures and lower share count in the current year period.

The Western Union Company Price, Consensus and EPS Surprise

 

Behind the Headlines

Total revenues of $1.11 billion beat the Zacks Consensus Estimate by 2.21% but the top line declined 17.2% year over year due to lower transaction levels resulting from the COVID-19 pandemic.

 

Digital money transfer revenues grew 48% year over year or 50% on constant currency basis to $219 million in the second quarter.
Total expenses of $892.9 million fell 17% year over year owing to reduced cost of services and selling, general and administrative expenses.

Segmental Update

Consumer to Consumer (C2C)

Revenues of $976.6 million dropped 12% year over year on a reported basis and 11% in constant currency. Total transactions decreased 8%. Covid-19-led disruption deflated revenues across all regions, except in Europe and CIS. The pandemic took a toll on global economy and remittances.

Digital revenues and transactions represented 22% and 31% of the C2C business in the quarter, respectively. Within the digital money transfer business, westernunion.com revenues surged 33% reportedly and 34% at cc including cross-border revenue growth of 48%.

Operating income of $212.8 million decreased 15% year over year.

Operating margin contracted 70 basis points year over year to 21.8%.

Business Solutions

Revenues of $79.4 million deteriorated 17% on a reported basis or 15% on constant currency basis due to softening trends in verticals more exposed to COVID-19 including education, travel and tourism, and small and medium-sized enterprises.

The segment reported operating income of $1.3 million, down 88% year over year. Operating margin shrank 930 basis points year over year to 1.6%.

Balance Sheet (as of Jun 30, 2020)

Cash and cash equivalents were $1.18 billion, down 18.5% from the level at 2019 end.

Borrowings dipped nearly 4.9% to $3.08 billion from the level at 2019 end.

Stockholders' equity was a deficit of $73.4 million, which widened from the deficit of $39.5 million at the end of 2019.

For the first six months of 2020, the company generated net cash worth $347.8 million from operations, down 13.6% year over year.

Zacks Rank

Western Union carries a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other companies in the remittance industry, earnings of MoneyGram International Inc. (MGI - Free Report) and PayPal Holdings, Inc. (PYPL - Free Report) beat second-quarter estimates by 109.1% and 27.38%, respectively.

Another company Square Inc. (SQ - Free Report) is expected to report earnings results, today, after market close.

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