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Western Union (WU) Q1 Earnings Beat, Trims '22 EPS View

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The Western Union Company (WU - Free Report) recently reported first-quarter 2022 earnings per share of 51 cents, which outpaced the Zacks Consensus Estimate and improved year over year by nearly 16%.

WU’s bottom-line results benefited from improved operating margin and share buybacks. However, the upside was partly offset by a higher effective tax rate.

Meanwhile, total revenues amounted to $1.2 billion, which fell 4% year over year on a reported basis and 1% on a constant currency basis in the first quarter. The top line was dampened by decrease in retail money transfer coupled with discontinuing its operations across Russia and Belarus. However, strong digital money transfer revenues partly offset the downside to some extent. The top line beat the Zacks Consensus Estimate by a whisker.

Other Quarterly Results

Western Union’s total expenses declined 6% year over year to $918.2 million on the back of reduced cost of services, and selling, general and administrative expenses in the to-be-reported quarter.

Revenues of the Consumer-to-Consumer (C2C) segment, which usually contributes the most to its top line, slipped 5% year over year on a reported basis or 3% on a constant currency basis. Meanwhile, transactions decreased 4% year over year in the first quarter.

Digital money transfer revenues improved 5% year over year on a reported basis or 6% on a constant currency basis. The same metric accounted for 25% and 37% of overall C2C revenues and transactions, respectively. A strong digital arm built on the back of several partnerships and solid investments continues to pave the way for strong digital money transfer revenues.

Revenues of Westernunion.com not only climbed 4% year over year on a reported basis and 5% on a constant currency basis but comprised 7% cross-border revenue growth.

Update on Business Solutions’ Divestiture

Western Union announced its decision to divest Western Union Business Solutions in August 2021 in a bid to intensify focus on the global cross-border consumer payments market. The deal was supposed to close in two stages, as stated by management. The first closing of the divestiture deal was completed in March 2022, wherein WU received the full proceeds of the transaction. The second closing is anticipated to be closed in the second half of 2022 subject to regulatory approvals.

Balance Sheet (as of Mar 31, 2022)

Western Union exited the first quarter with cash and cash equivalents of $1.3 billion, which increased 7.2% from the 2021-end level.

Borrowings of $2.5 billion plunged 15.8% from the figure at the 2021-end.

Total stockholders' equity amounted to $352.8 million, down 0.8% from the 2021-end level.

Net cash provided by operating activities improved 13.8% year over year to $200 million in the first quarter.

Capital Deployment

In the first quarter, Western Union rewarded $242 million to shareholders, which included $150 million through share buybacks and dividends worth $92 million.

2022 Guidance Altered

With Western Union discontinuing operations in Russia and Belarus, management revised its guidance for 2022.

Adjusted revenues (constant currency, excluding the impact of Argentina inflation and proforma for the planned sale of Business Solutions) are now anticipated to witness low-single digit decline, while the earlier view expected the metric to be flat to increase low-single digit.

Adjusted EPS is estimated to lie within $1.75 and $1.85 this year, down from its earlier outlook of $1.90-$2.00.

Operating profit margin is projected to be roughly 20%, down from the prior expectation of 21-22%.

Other Business Services Sector Releases

Of the Business Services sector players that have reported first-quarter results so far, the bottom line of Mastercard Incorporated (MA - Free Report) , WEX Inc. (WEX - Free Report) and The Interpublic Group of Companies, Inc. (IPG - Free Report) beat the Zacks Consensus Estimate.

Mastercard reported first-quarter 2022 earnings of $2.76 per share, which outpaced the Zacks Consensus Estimate by 27.2%. The bottom line surged 59% year over year. MA’s revenues amounted to $5.2 billion, which improved 24% year over year in the quarter under review. The top line beat the consensus mark by 5.4%. Gross Dollar Volume (representing the aggregated dollar amount of purchases made and cash disbursements obtained from Mastercard-branded cards) came in at $1.9 trillion, which climbed 17% year over year in the first quarter.

WEX’s adjusted earnings of $2.88 per share surpassed the Zacks Consensus Estimate by 6.3% and increased 61% year over year. WEX’s total revenues of $517.5 million outpaced the consensus mark by 2% and improved 26% year over year. Fleet Solutions’ revenues were up 31% year over year to $319.1 million. Travel and Corporate Solutions’ revenues of $77.3 million were up 9% year over year. Health and Employee Benefit Solutions revenues of $121.1 million registered 26% year-over-year growth.

Interpublic Group’s adjusted earnings (excluding 7 cents from non-recurring items) of 47 cents per share beat the Zacks Consensus Estimate by 17.5%. The bottom line rose 4.4% on a year-over-year basis. IPG’s net revenues of $2.23 billion beat the consensus mark by 3.3% but declined 1.3% on a year-over-year basis. Total revenues of $2.57 billion increased 13.8% year over year. Operating income of Interpublic Group in the quarter was $245.7 million, up 1% from the prior-year quarter.