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Western Union (WU) Down 15.5% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Western Union (WU - Free Report) . Shares have lost about 15.5% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Western Union Q4 Earnings Miss Estimates Despite Low Costs
Western Union reported fourth-quarter 2022 adjusted earnings per share (EPS) of 32 cents, missing the Zacks Consensus Estimate of 34 cents. The bottom line plunged 50% year over year.
Total revenues fell 15% year over year on a reported basis or 6% on a constant currency basis to $1,091.9 million. However, the top line beat the Zacks Consensus Estimate of $1,074 million.
The weak quarterly earnings were due to a negative currency impact, discontinuation of operations across Russia and Belarus and higher adjusted effective tax rate. Weaker performance in the Consumer-to-Consumer (C2C) segment also affected results. Nevertheless, the downside was partly offset by a lower expense level and double-digit growth in U.S. outbound new digital customer acquisition (30%).
Q4 Performance
Adjusted operating margin of 15.8% deteriorated from 24.9% a year ago due to lower revenues and increased technology and market-linked investments. Fourth-quarter adjusted effective tax rate of 14.7% was higher than 12.1% in the year-ago period.
Western Union’s total expenses came in at $940.3 million, down 3% year over year. Lower cost of services contributed to this decline in overall expenses in the fourth quarter, partially offset by higher SG&A expenses.
C2C Segment
The C2C segment reported revenues of $985.2 million, which tumbled 11% year over year on a reported basis or 9% on a constant currency basis in the quarter under review. The segment’s revenues fell short of the Zacks Consensus Estimate of $986.4 million. Operating income plunged 49% year over year to $138.6 million. The operating income margin of 14.1% fell from 24.2% a year ago.
Transactions within the C2C segment fell 12% year over year, affected by the suspension of operations in Russia and Belarus. Furthermore, lower transactions across Europe and CIS, North America, APAC and the Middle East, Africa and South Asia (MEASA).
Branded Digital revenues decreased 8% on a reported basis or 6% on a constant currency basis.
Business Solutions
The Business Solutions segment reported revenues of $29.5 million, which plunged 73% year over year but beat the Zacks Consensus Estimate by 16.8%. Operating income of $6.8 million fell 80% year over year. The operating income margin was at 23.1% in the fourth quarter, down from 30.8% a year ago.
Balance Sheet (as of Dec 31, 2022)
Western Union exited the fourth quarter with cash and cash equivalents of $1,285.9 million, increasing from the 2021-end level of $1,208.3 million. Total assets of $8,496.3 million declined from the $8,823.5 million figure in 2021 end.
Borrowings dropped from the $3,008.4 million figure at the 2021 end to $2,616.8 million.
Total stockholders' equity of $477.8 million surged from the $355.6 million level as of Dec 31, 2021.
In 2022, net cash provided by operating activities decreased from $1,045.3 million in 2021 to $581.6 million.
Capital Deployment
Western Union rewarded its shareholders with $263 million through $88 million in dividends and share buybacks worth $175 million during the fourth quarter.
The board approved a dividend of 23.5 cents per share for the first quarter of 2023.
2023 Guidance
Western Union expects adjusted revenues to decline 2-4% in 2023 from the 2022 level of $1,107.3 million. Adjusted EPS is anticipated within $1.55-$1.65 for 2023. The midpoint of the guidance indicates a decline from the 2022 reported figure of $1.76 per share.
Adjusted operating margin is expected between 19% and 21%. The metric stood at 20.4% in 2022.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -13.16% due to these changes.
VGM Scores
At this time, Western Union has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Following the exact same course, 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.
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Western Union (WU) Down 15.5% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Western Union (WU - Free Report) . Shares have lost about 15.5% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Western Union Q4 Earnings Miss Estimates Despite Low Costs
Western Union reported fourth-quarter 2022 adjusted earnings per share (EPS) of 32 cents, missing the Zacks Consensus Estimate of 34 cents. The bottom line plunged 50% year over year.
Total revenues fell 15% year over year on a reported basis or 6% on a constant currency basis to $1,091.9 million. However, the top line beat the Zacks Consensus Estimate of $1,074 million.
The weak quarterly earnings were due to a negative currency impact, discontinuation of operations across Russia and Belarus and higher adjusted effective tax rate. Weaker performance in the Consumer-to-Consumer (C2C) segment also affected results. Nevertheless, the downside was partly offset by a lower expense level and double-digit growth in U.S. outbound new digital customer acquisition (30%).
Q4 Performance
Adjusted operating margin of 15.8% deteriorated from 24.9% a year ago due to lower revenues and increased technology and market-linked investments. Fourth-quarter adjusted effective tax rate of 14.7% was higher than 12.1% in the year-ago period.
Western Union’s total expenses came in at $940.3 million, down 3% year over year. Lower cost of services contributed to this decline in overall expenses in the fourth quarter, partially offset by higher SG&A expenses.
C2C Segment
The C2C segment reported revenues of $985.2 million, which tumbled 11% year over year on a reported basis or 9% on a constant currency basis in the quarter under review. The segment’s revenues fell short of the Zacks Consensus Estimate of $986.4 million. Operating income plunged 49% year over year to $138.6 million. The operating income margin of 14.1% fell from 24.2% a year ago.
Transactions within the C2C segment fell 12% year over year, affected by the suspension of operations in Russia and Belarus. Furthermore, lower transactions across Europe and CIS, North America, APAC and the Middle East, Africa and South Asia (MEASA).
Branded Digital revenues decreased 8% on a reported basis or 6% on a constant currency basis.
Business Solutions
The Business Solutions segment reported revenues of $29.5 million, which plunged 73% year over year but beat the Zacks Consensus Estimate by 16.8%. Operating income of $6.8 million fell 80% year over year. The operating income margin was at 23.1% in the fourth quarter, down from 30.8% a year ago.
Balance Sheet (as of Dec 31, 2022)
Western Union exited the fourth quarter with cash and cash equivalents of $1,285.9 million, increasing from the 2021-end level of $1,208.3 million. Total assets of $8,496.3 million declined from the $8,823.5 million figure in 2021 end.
Borrowings dropped from the $3,008.4 million figure at the 2021 end to $2,616.8 million.
Total stockholders' equity of $477.8 million surged from the $355.6 million level as of Dec 31, 2021.
In 2022, net cash provided by operating activities decreased from $1,045.3 million in 2021 to $581.6 million.
Capital Deployment
Western Union rewarded its shareholders with $263 million through $88 million in dividends and share buybacks worth $175 million during the fourth quarter.
The board approved a dividend of 23.5 cents per share for the first quarter of 2023.
2023 Guidance
Western Union expects adjusted revenues to decline 2-4% in 2023 from the 2022 level of $1,107.3 million. Adjusted EPS is anticipated within $1.55-$1.65 for 2023. The midpoint of the guidance indicates a decline from the 2022 reported figure of $1.76 per share.
Adjusted operating margin is expected between 19% and 21%. The metric stood at 20.4% in 2022.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -13.16% due to these changes.
VGM Scores
At this time, Western Union has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Following the exact same course, 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.