We have reiterated our recommendation on
Western Union Co.
) at Neutral following the fourth-quarter 2012 earnings release.
Western Union reported a solid fourth quarter, which included a
20.0% positive earnings surprise.
We remain confident on the company's long-term growth
prospects. However, over the near term, earnings will remain
under pressure due to regulatory and macroeconomic
Western Union's key business, Consumer-to-Consumer, has been
performing favorably for the past several years. We believe that
this business segment will continue to be attractive as worldwide
immigration is likely to keep increasing.
Western Union is also aggressively positioning its
Business Solutions segment in the rapidly growing cross-border
payments market for small to medium-sized enterprises.
Western Union is expanding internationally and is eyeing the
emerging economies of China and India, where the remittance
market is still under-penetrated. Another money transfer company,
Moneygram International Inc.
) also has an active presence in Asia.
Further, WU is aggressively expanding its new age technology
offerings, which include mobile, electronic, and online money
transfer among others. The company also offers prepaid card
service for money transfer via
This Zacks Rank #3 (Hold) company has a wide agent network,
which has grown rapidly over the past few years, enhancing its
global presence. The company is determined to achieve 1 million
agent locations worldwide. We believe that this ongoing
investment in the brand and new agents reflects Meredith's
confidence in its market position.
However, Western Union's business is dependent on the global
macroeconomic situation, particularly the high levels of
unemployment. Since the major economies of the world are facing
downturns, the remittance volume may be negatively impacted,
causing restricted earnings.
Following the earnings release, over the last 30 days, 1 of
the 17 estimates moved upward, while 12 of 17 estimates moved
downward. The downward estimate revisions led to a 2.7% fall in
the Zacks Consensus Estimate for full year 2013 to $1.43.
Other financial service provider company
H&R Block, Inc.
) with a Zacks Rank #2 (Buy) is worth considering.
BLOCK H & R (HRB): Free Stock Analysis
MASTERCARD INC (MA): Free Stock Analysis
MONEYGRAM INTL (MGI): Free Stock Analysis
WESTERN UNION (WU): Free Stock Analysis
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