Western Union Co. (WU - Free Report) is set to report second-quarter 2014 results after the market close on Jul 31.
In the last quarter, this money transfer company delivered a 5.7% positive earnings surprise. The average beat for the trailing four quarters is 7.7%.
Will Western Union be able to keep its earnings streak alive this quarter? Let's see what factors might have influenced the earnings report this time around.
Factors Likely to Influence Q2 Results
We believe the quarter’s results will be affected by recent pricing reductions in response to declining market share, increasing global regulatory oversight and growing competition in digital channels.
Western Union’s strong international business will lead to earnings accretion. More than 80% of its agents are based internationally. Since the company faces less competition outside the U.S., the international segment promises growth. In May, Western Union Business Solutions, a dedicated business payment unit in Malaysia, was launched.
Moreover, Western Union’s attempt to develop its technology offerings like prepaid, westernunion.com and mobile money transfer will generate revenues. During the quarter, the company expanded its digital presence in Nigeria.
On the flip side, the company currently faces compliance-related challenges. The company expects compliance costs to hurt 2014 revenues by approximately 3.5% to 4%. High compliance costs during the quarter could erode Western Union’s bottom line.
Our proven model does not conclusively show that Western Union is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. However, that is not the case here as you will see below.
Zacks ESP: Western Union’s Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 36 cents.
Zacks Rank: Western Union has a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Oaktree Capital Group, LLC (OAK - Free Report) has an Earnings ESP of +6.9% and Zacks Rank #2 (Buy).
Qiwiplc (QIWI - Free Report) has an Earnings ESP of +4.8% and a Zacks Rank #2.
Cigna Corp. (CI - Free Report) has an Earnings ESP of +1.1% and a Zacks Rank #3.