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Should You Ignore the Fall in Western Union's (WU) Stock?

Western Union Co.WU seems poised for long-term growth on the back of steady investment in digital platform, which has been paying off well. Numerous alliances, pacts and deal renewals have also broadened the company's network in the United States as well as across the globe.

The stock has declined 3.7% year to date, against the industry 's growth of 13.9%. Given its numerous tailwinds that should favor the stock price in the coming quarters, the stock represents a solid buying opportunity.

The Zacks Ranked #2 (Buy) stock currently carries a Value Style Score of A. Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best opportunities in the value investing space.

The Zacks Consensus Estimate for current-year earnings of the company has been revised 3.8% upward over the past 60 days, which reflects analysts' optimism surrounding the stock.

What Should Drive the Company's Profitability?

Western Union, one of the world's leading money remittance companies, has been rapidly developing its digitally-initiated money transfer platform, which includes westernunion.com and Mobile Money Transfer. This is the fastest-growing segment of the market, bringing in new customers and aiding business growth for Western Union. Revenues from the company's digital platform have been increasing over the past few quarters.

Western Union's digital business continued its impressive run, with 23% revenue growth or 20% increase in constant currency, in the last reported quarter. westernunion.com is becoming an increasingly important part of the company's business, representing 11% of the total money transfer revenues in the quarter, up from 6% recorded three years ago.

Western Union's key business Consumer-to-Consumer (accounting for nearly 80% of the company's revenues) will remain attractive, as worldwide immigration has been experiencing healthy growth. We expect further improvement in margins, as technology investment and other cost-reduction initiatives pay off. Improvement in cross-border remittance and strong economy will lead to higher demand for money transfer services and accrue to the segment's top line.

The company generates solid free cash flow and has a stable track record of returning capital to its shareholders via share buybacks and dividend payments. In February, the company increased its quarterly dividend by 9%. The company's current dividend yield of 4.2% is way higher than the industry's 0.6%, which makes it all the more attractive to investors.

Other Stocks to Consider

Investors interested in the financial transaction services industry might opt for other top-ranked stocks like Cardtronics PLC CATM , Green Dot Corporation GDOT and Evertec, Inc. EVTC . While Cardtronics and Green Dot carry a Zacks Rank #1 (Strong Buy), Evertec holds the same rank as Western Union. You can see the complete list of today's Zacks #1 Rank stocks here .

Cardtronics, Green Dot and Evertec have surpassed estimates in each of the last four reported quarters by 50.3%, 18.4% and 17%, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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