The Western Union Company (WU Quick QuoteWU - Free Report) shares have gained 13.2% since it reported first-quarter 2023 results on May 2. The better-than-expected quarterly earnings were due to strength in the Middle East business, Evolve 2025’s momentum, lower consumer acquisition costs and transaction growth. However, adverse currency impact, discontinuation of operations across Russia and Belarus and promotional pricing activities affected the results.

WU reported first-quarter 2023 adjusted earnings per share (EPS) of 43 cents, beating the Zacks Consensus Estimate by 30.3%. However, the bottom line declined 15.7% year over year.

Total revenues fell 10% year over year on a reported basis or 1% on a constant-currency basis to $1,036.9 million. However, the top line beat the Zacks Consensus Estimate by 3.8% and our estimate of $995.8 million.

Q1 Performance

Adjusted operating margin of 20.5% deteriorated 130 basis points year over year due to lower revenues and increased technology and market-linked investments. First-quarter adjusted effective tax rate of 13.5% was higher than 13% in the year-ago period.

Western Union’s total expenses came in at $832.2 million, down 9% year over year. Lower cost of services and SG&A expenses contributed to this decline in overall expenses in the first quarter.

C2C Segment

The C2C segment reported revenues of $938.3 million, which tumbled 6% year over year on a reported basis or 5% on a constant-currency basis in the quarter under review. The segment’s revenues beat the Zacks Consensus Estimate by 1.1%. Operating income plunged 14% year over year to $177.8 million. The operating income margin of 18.9% fell from 20.7% a year ago.

Transactions within the C2C segment fell 6% year over year, affected by the suspension of operations in Russia and Belarus. Furthermore, lower transactions across Europe and the Commonwealth of Independent States, North America and Asia Pacific region were partially offset by strong Latin American and Caribbean Region and the Middle East, Africa and South Asia.

Branded Digital revenues decreased 7% on a reported basis or 6% on a constant-currency basis.

Business Solutions

The Business Solutions segment reported revenues of $15.4 million, which plunged 83% year over year but beat the Zacks Consensus Estimate by a huge margin. Operating income of $1.9 million fell 93% year over year. The operating income margin was 12.7% in the first quarter, down from 30.8% a year ago.

Balance Sheet (as of Mar 31, 2023)

Western Union exited the first quarter with cash and cash equivalents of $1,228.6 million, decreasing from the 2022-end level of $1,285.9 million. Total assets of $8,233.5 million declined from the $8,496.3 million figure at 2022-end.

Borrowings dropped from $2,616.8 million at 2022-end to $2,462.7 million.

Total stockholders' equity of $552.8 million increased from $477.8 million as of Dec 31, 2022.

In the first quarter, net cash provided by operating activities decreased from $200 million in 2022 to $137.3 million.

Dividend Update

Western Union rewarded its shareholders with $88 million in dividends in the first quarter.

2023 Guidance

The company reiterated its guidance for 2023, which it had provided in the prior quarter. 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.

Update on Business Solutions Sell-Off

Western Union had inked a deal with Goldfinch Partners LLC and The Baupost Group LLC to divest its Business Solutions unit in two stages. The first closing took place on Mar 1, 2022.

However, in the third quarter, with the mutual consent of all the parties to the divestiture agreement, a decision was taken to divest Business Solutions in three stages. The second closing related to the sale of the United Kingdom operations was made in December 2022. In the third stage, the European Union operations included within the Business Solutions unit is expected to be divested in the second quarter of 2023.

Zacks Rank

Western Union currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Financial Transaction Services Players

Fiserv, Inc. reported impressive first-quarter 2023 results, wherein earnings and revenues beat the Zacks Consensus Estimate.

Adjusted earnings per share (excluding 69 cents from non-recurring items) of $1.58 increased 12.9% year over year, beating the consensus mark by 1.3%. Earnings beat our estimate by 2.6%. Adjusted revenues of $4.28 billion beat the Zacks Consensus Estimate by 3% and increased 9.5% year over year. Revenues surpassed our estimates by 4.7%.

Fidelity National Information Services, Inc. (FIS Quick QuoteFIS - Free Report) reported first-quarter 2023 adjusted EPS of $1.29, which outpaced the Zacks Consensus Estimate by 7.5% and our estimate of $1.17. However, the bottom line declined 12.2% year over year.

Revenues inched up 1% year over year to $3,510 million. The top line beat the consensus mark by 3.1% and our estimate of $3,381.8 million. The organic revenue growth came in at 3% in the quarter under review.

Bread Financial Holdings, Inc. (BFH Quick QuoteBFH - Free Report) operating income of $9.08 per share for the first quarter of 2023 beat the Zacks Consensus Estimate by 26.1% and came ahead of our estimate of $4.06. The bottom line more than doubled year over year.

Revenues increased 40% year over year to $1.3 billion, resulting from higher average loan balances and improved loan yields. The top line beat the consensus estimate by 23.9% and surpassed our estimate of $1.1 billion.