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.
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.
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%
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 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.
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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