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Will Western Union (WU) Pull Off a Beat in Q1 Earnings?

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Western Union Co. (WU - Free Report) first-quarter earnings, to be reported on May 1, 2018, should see an upside from higher contribution in its consumer-to-consumer segment, which represents 80% of the company’s revenues, driven by growing worldwide immigration which induces demand for money remittance. We expect further improvement in margins as technology investment and other cost-reduction initiatives pay off. Improvement in cross-border remittance and strong growth in digital platform will lead to higher demand for money transfer services and will accrue to the segment’s top line.

Region wise, revenue growth in the C2C segment should be seen from the Middle East Africa and South Asia region, benefiting from improved results at oil producing countries including Saudi Arabia. The Latin America and Caribbean region continue to deliver strong revenue growth, driven by Argentina and several other South American markets. In the Europe and CIS region, revenue growth was led by France.  The Zacks Consensus Estimate for total revenues in the C2C segment is $1.05 billion, up 2.9% year over year.

Results should be to some extent offset by a subdued performance from the Business Solutions segment. The Zacks Consensus Estimate for total revenues from this segment is $94 million, flat year over year.

Other revenues, which consist primarily of the company’s bill payments businesses, should have increased in the first quarter, led by Speedpay, electronic bill payments in the United States, and the Pago Facil walk-in business in Argentina.

The bottom line might suffer from elevated compliance spending. Share repurchases made by the company, from its strong cash flow generation, will aid earnings.

Earnings Surprise

The company boasts an attractive earnings surprise history, having surpassed estimates in two of the trailing four quarters, with an average positive surprise of 5.05%. This is depicted in the chart below:

The Western Union Company Price and EPS Surprise

Here is what our quantitative model predicts:

Our proven model does not conclusively show that Western Union is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Western Union has an Earning ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Though Western Union carries a Zacks Rank #3 (Hold), its ESP makes our surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies that you may consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:  

Mastercard Incorporated (MA - Free Report) is expected to report first-quarter 2018 earnings results on May 2. The company has an Earnings ESP of +0.03% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

WEX Inc. (WEX - Free Report) has an Earnings ESP of +0.44% and a Zacks Rank #2. The company is expected to report first-quarter earnings results on May 3.

Cardtronics Plc is expected to report first-quarter 2018 earnings results on May 3. The company has an Earnings ESP of +10.00% and a Zacks Rank #2.

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