Estimates for The Western Union Company (WU - Free Report) have been revised upward over the past 30 days, reflecting analysts' optimism on the stock. The stock has seen the Zacks Consensus Estimate for 2018 earnings move 0.5% north over the same time frame.
The company also carries an impressive Value Score of A. Our research shows that stocks with a Value Style Score of A or B when combined with a favorabe Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best opportunities in the value investment space.
Now, let’s focus on some important factors that make the company an investor favorite.
Earnings Surprise History: The company’s surprise story shows that its earnings beat estimates in two of the trailing four reported quarters, the average beat being 1.63%.
Raised Earnings Guidance: Following its solid results, the company lifted its adjusted earnings per share range to $1.88-$1.95, up from $1.80-$1.90 in the previous outlook. It expects operating margin of approximately 20%, a tax rate of approximately 12% (approximately 14-15% in the past), a low single-digit GAAP revenue increase and a low-to-mid single-digit rise in revenues at constant currency. An upped earnings view instills investors' confidence in the company.
Attractive Consumer-to-Consumer Segment: The main segment contributing a lion’s share to the company’s net revenues — Consumer-to-Consumer — remains attractive. We expect further expansion 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 accrue to the segment’s top line.
Digital Offerings and Growth Initiatives: Moreover, Western Union’s digitally enabled money transfer including westernunion.com and Mobile Money Transfer is the fastest-growing segment of the market, bringing in new customers and boosting business. Reportedly, westernunion.com is expanded to 50 countries and territories. The company also has many other digital opportunities in progress. It recently opened a unique global money movement platform to new partners. Significant progress in its global digital endeavors should further drive revenues for growth.
Capital Management: The company remains committed to enhance shareholder value through share buybacks and dividend payments. In February, it hiked its quarterly dividend by 9%. Western Union’s current dividend yield of 4.1% is way higher than the industry’s 1.6%.
Growth Projections: The Zacks Consensus Estimate for current-year earnings is pegged at $1.92, representing a year-over-year increase of 6.7% on 2% higher revenues of $5.64 billion. For 2019, the consensus estimate for earnings stands at $1.94 on revenues of $5.78 billion, translating into a respective year-over-year rise of 0.98% and 2.63%.
Undervalued: Its valuation looks attractive at the current level. The company has a forward 12-month P/S ratio of 1.47, significantly lower than the industry average of 4.15, which should attract investors.
Shares of this Zacks Rank #2 (Buy) company have lost 7.3% in a year’s time against its industry’s growth of 7.3%.
Other Stocks to Consider
Investors interested in the financial transaction services sector can also look into some other top-ranked stocks like Cardtronics plc (CATM - Free Report) , Evertec, Inc. (EVTC - Free Report) and Green Dot Corporation (GDOT - Free Report) .
Cardtronics plc provides automated consumer financial services via its network of automated teller machines (ATMs) and multi-function financial services kiosks. The company sports a Zacks Rank #1 (Strong Buy) and came up with average four-quarter beat of 50.24%. You can see the complete list of today’s Zacks #1 Rank stocks here.
EVERTEC engages in transaction processing business, serving financial institutions, merchants, corporations and government agencies in Latin America and the Caribbean. The stock carries a Zacks Rank of 2 and pulled off average earnings surprise of 16.99% over the last four reported quarters.
Green Dot operates as a pro-consumer bank holding company, providing personal banking for the masses. The company has a Zacks Rank of 1 and delivered average four-quarter positive surprise of 18.40%.
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