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Western Union (WU) Beats on Q2 Earnings, Revises Guidance

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The Western Union Company (WU - Free Report) reported second-quarter 2017 operating earnings per share of 50 cents, comfortably beating the Zacks Consensus Estimate of 42 cents by 19%. Earnings also improved 13.6% year over year.

Each of the segments delivered improved operating profit in the quarter.

Western Union Company (The) Price, Consensus and EPS Surprise


Behind The Headlines

Total revenue of $1.379 billion increased 0.2% year-over-year and beat Zacks Consensus Estimate of $1.372 billion.

Western Union’s total expense increased 4.4% year over year to $1.2 billion.

Adjusted operating margin was 21.7%, expanded 150 basis points year over year. This improvement stemmed from the timing of marketing spending and lower commission expenses.

The company continues to remain focused to expand its digital initiatives, optimize the retail money transfer business and drive operational efficiencies.

Segment Update

Revenues of the Consumer-to-Consumer (C2C) segment, which contributes nearly 79% to the company’s top line, slipped 1% on a year-over-year basis, but was again up 1% on a constant currency basis to $1.1 billion. Total transactions grew 3%, driven by the strength at Revenues from surged 21% or 23% on a constant currency basis on transaction growth of 25%. Notably, represented 9% of total C2C revenue in the reported quarter.

Operating income increased 7% year over year to $269.9 million. Operating margin expanded 180 basis points to 24.8%.

Business Solutions revenues decreased 4% or 1% on a constant currency basis year over year to $96.6 million. This segment reported operating income of $5.3 million in the quarter, up 1% year over year. Operating margin expanded 30 basis points to 5.5%.

Other revenues, consisting of the U.S. as well as Argentina bill payments businesses, improved 9% or 12% on a constant currency basis. This upside was fueled by better performance at Speedpay U.S. electronic and Pago Facil Argentina walk-in bill payments businesses.

The businesses, previously being reported in a separate Consumer-to-Business segment, are now reported in Other, due to recent organizational changes.

Operating income rallied 16% year over year to $23.6 million. Operating margin expanded 80 basis points to 12.1%.

Financial Update

Cash and cash equivalents as of Jun 30, 2017 were $1.1 billion, up from $0.9 billion at 2016- end.

As of Jun 30, 2017, the stockholders’ equity was $661 million, massively down from $902 million at year-end 2016.

Cash used in operating activities was $24 million in the first half of 2017 compared with $485.6 million of cash generated from operations at the same time around in 2016.

Share Repurchase and Dividend Update

In the reported quarter, the company returned $232 million to its shareholders through share repurchases ($150 million) and dividends ($82 million).

2017 Guidance Revised

Western Union lowered its outlook for 2017. It expects growth of flat-to-low single digit decrease in GAAP revenues, or a low single-digit increase on a constant currency basis. The company projects GAAP operating margin of approximately 17% (curtailed from18%) and adjusted operating margin of approximately 20%. Besides, the GAAP EPS is projected in a range of $1.46-$1.56 ($1.48-$1.60, guided earlier) and adjusted EPS in a $1.70-$1.80 band ($1.63-$1.75 guided earlier). Adjusted EPS excludes the impact of the WU Way related expenses.

Cash flow from operating activities is estimated to be $200 million.

Zacks Rank

Western Union currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Stocks

Among other companies in the same space, Total System Services, Inc. (TSS - Free Report) and Vantiv, Inc. VNTV) beat second-quarter earnings estimates, while Fiserv, Inc. (FISV - Free Report) missed the same.

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