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Western Union (WU) Q2 Earnings Miss Estimates, Down Y/Y

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The Western Union Company (WU - Free Report) reported second-quarter 2018 operating earnings per share of 46 cents, which missed the Zacks Consensus Estimate of 47 cents. Moreover, the bottom line declined 8% year over year due to weak performances by the Business Solutions and Other segments.

The Western Union Company Price, Consensus and EPS Surprise

The Western Union Company Price, Consensus and EPS Surprise | The Western Union Company Quote

Behind the Headlines

Total revenues of nearly $1.4 billion increased 2% on a year-over-year basis and 3% on a constant currency basis. The top-line growth was driven by the company’s global consumer money transfer business and westernunion.com.

Western Union generated operating income of $283.6 million, up nearly 32% year over year.

Adjusted operating margin of 20.1% declined 160 basis points (bps) year over year due to the timing of marketing and expenditure due to compliance.

Segment Update

Consumer-to-Consumer (C2C)


Revenues for the segment rose 4% on a reported basis and 3% on constant currency to $1.1 billion, led by higher transactions. Total transactions grew 5%, driven by strength at westernunion.com.

Revenues from westernunion.com C2C improved 22% on a reported basis and 21% on a constant currency basis. Revenues rose on the back of 26% transaction growth. Notably, westernunion.com represented 11% of total C2C revenues in the quarter under review.

Operating income dipped 1.5% year over year to $266.2 million. Operating margin contracted 130 bps to 23.6%

Business Solutions

Revenues decreased 4% on a normal basis and 6% on a constant currency basis year over year to $93.1 million due to decline in some parts such as Europe.

The segment reported operating income of $1.1 million in the second quarter, down 79.2% year over year.

Its operating margin fell 430 bps to 1.2%.

Other

Other segment primarily consists of the U.S. and Argentina bill payments businesses. Revenues slipped 2% but increased 9% on a constant currency basis to $190.5 million.

Operating income declined 31.2% to $16.3 million and operating margin contracted 360 bps to 8.5%, both on a year-over-year basis.

Balance Sheet

Cash and cash equivalents as of Jun 30, 2018 were $938.3 billion, up 12% from 2017-end level.

At quarter-end, borrowings rose nearly 10% to $3.3 billion from year-end 2017.

As of Jun 30, 2018, stockholders' equity was a deficit of $451.3 million compared with stockholder’s equity deficit of $491.4 million at year-end 2017.

Net cash from operations totaled $298.7 million compared with $24 million net cash used in operating activities.

Share Repurchase &Dividend Update

In the reported quarter, the company returned $86 million in dividends and $250 million in share buybacks to its shareholders.

Zacks Rank and Performance of Other Stocks

Western Union carries a Zacks Rank #4 (Sell).

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

Among other Financial Transaction Services providers, Visa Inc. (V - Free Report) , Total System Services, Inc. (TSS - Free Report) and Alliance Data Systems Corp. (ADS - Free Report) came out with flying colors as the bottom line of each beat the respective Zacks Consensus Estimate in the second quarter.

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