A month has gone by since the last earnings report for Western Union (WU Quick QuoteWU - Free Report) . Shares have lost about 2.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Western Union due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Western Union Q2 Earnings Beat Mark, Revenues Rise Y/Y

Western Union earnings per share of 48 cents beat the Zacks Consensus Estimate by 2.13%. The bottom line grew 17.1% year over year.

Better-than-expected results were driven by revenue growth, gain on an investment sale, and a lower effective tax rate. Debt retirement expenses, compensation-related expenses and strategic investments in marketing and technology were partial offsets.

Total revenues of $1.29 billion improved 15.7% year over year and outpaced the Zacks Consensus Estimate by 3.23%.

Prudent Divestiture

The company announced the sale of its unit Western Union Business Solutions. The axing of the same will deepen its focus on the core growth areas of the global cross-border consumer payments market and expand its open platform strategy. Revenues at the segment have been declining over several years, thus dragging down overall growth. The divestment move will streamline the company’s operations and help it achieve higher return on equity.

The transaction is expected to be concluded in two stages. The first closing, which is expected to be completed in early 2022, will likely generate $800 million in proceeds. The second closing is likely to end by late 2022.

Digitally-Enabled Transaction Growth

In its largest segment Consumer to consumer (C2C) (87% of total revenues), revenues grew 15% year over year while the operating income was up 10%. Reopening of economy and higher remittance by people across the border led to an increase in cross-border money transfer revenues, which rose 18% year over year.

Western Union made investments in its digital platform to stay ahead in the fast-changing remittance market. Its vast electronic platform built over the years, helped it during the pandemic-borne crisis when people turned away from its brick-and-mortar stores to send money to their families online. During the quarter, digital money transfer revenues increased 19% at constant currency, and represented 24% and 36% of total C2C revenues and transactions, respectively.

That the company’s mobile app is being widely used is evident from the 14% rise in its average monthly active users. Data provided by the mobile app marketing firm Sensor Tower showed that Westernunion.com was the most downloaded mobile app among its peer money transfer companies during the second quarter.

Guidance Reaffirmed

The company reiterated its 2021 financial outlook for revenue growth and its remaining metrics on an adjusted basis. Revenues are likely to see a mid-single digit increase excluding the Argentina-inflation impact. Operating margin is expected at 21.5% while EPS is envisioned in the range of $2-$2.10.

 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Western Union has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Western Union has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.