The Western Union Company ( WU Quick Quote WU - Free Report) is gaining momentum from a solid digital arm, digital tie-ups and prudent capital deployment measures.
The company has an impressive earnings surprise history. It has beat estimates in each of the trailing four quarters, the average surprise being 12.41%. Over the past 30 days, the company’s 2021 earnings estimates have moved north by 2% that reflects investors’ optimism.
Western Union’s trailing 12-month return on equity (ROE) remains not only way above 100% but is also higher than the
industry’s average of 25.7%. This highlights the company’s tactical utilization of shareholders’ funds.
The company has an impressive
Value Score of A, which reflects an attractive valuation of the stock. What’s Driving the Stock?
This Zacks Rank #3 (Hold) company has left no stone unturned in building a strong digital money transfer platform by making substantial investments and undergoing digital tie-ups. It is worth mentioning that the company has been pursuing digital transformation strategy following a period of constant strain on its revenues. A robust digital arm provides the perfect ground to the company to bank on the prevailing scenario since digitization seems to be the new way of life. In fact, amid the COVID-19 pandemic, the trend of contactless payments gained immense importance as it involves minimum physical contact and funds can be transferred across borders on a real-time basis requiring lesser time and costs.
Case in point, digital money transfer revenues crossed $850 million in 2020 and improved 38% year over year. Management expects digital revenues for 2021 to reach around $1 billion. It also expects mid-single digit constant currency revenue growth for this year. Notably, the Zacks Consensus Estimate for 2021 revenues indicates year-over-year rise of 5.7%.
Moreover, Western Union has joined forces with several financial institutions worldwide in a bid to enhance international money transfers. Some of the notable tie-ups undertaken by the company this year include the ones with
Triterras Inc. ( TRIT Quick Quote TRIT - Free Report) , Advance America and Walmart Inc. ( WMT Quick Quote WMT - Free Report) . All these initiatives seem to be time opportune as the global contactless payment market is anticipated to witness a CAGR of 20.6% over the 2020-2027 period, per Allied Market Research.
Through cost-curbing initiatives, Western Union remains on track to generate approximately $100 million in annual savings in 2021. The company is well-poised to attain annual cost savings of $150 million by 2022.
Furthermore, the company has been committed to enhancing shareholder value. Based on a robust capital position, the company hiked its dividend at a eight-year CAGR of 8.2%. During 2020, it deployed $587 million of capital through share buybacks and dividend payments. Notably, the company’s current dividend yield of 3.7% remains higher than the industry average of 0.5%, which makes the stock an attractive pick for yield-seeking investors.
Shares of Western Union have gained 12.2% on a year-to-date basis compared with the industry’s rally of 3.6%.
The Zacks Consensus Estimate for 2021 earnings per share indicates year-over-year improvement of 10.2%. For 2021, the company expects earnings per share in the range of $2.00 to $2.10, the mid-point of which represents 9.6% growth from the 2020 reported figure.
A Stock to Consider
A better-ranked stock in the same space is
Diebold Nixdorf, Incorporated ( DBD Quick Quote DBD - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see . the complete list of today’s Zacks #1 Rank stocks here
Diebold Nixdorf has a trailing four-quarter earnings surprise of 261.88%, on average.
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