On Sep 23, we issued our updated research report on Western Union Co.WU . It is the largest global money transfer business, with 500,000 agent locations and a 17% share of the remittance market (migrants sending money back home). We expect the company to see long-term growth from a positive shift in global immigration.
The company has also been able to regain its lost market share in markets such as Mexico via pricing action taken in recent years. While pricing reduction had initially caused a slump in the top line, the initiatives are now bearing fruit by driving transactions in targeted markets.
Despite its wide agent network and market dominance in the money transfer industry, the company - which gets a huge chunk of business from physical money transfer - faces threats from the proliferation of electronic cash remittance through mobile phone and the Internet. Western Union is aggressively building its digital platform but it will take time before it can catch up with more established players offering niche electronic payment services.
The company might also face stiff competition from Paypal PayPal Holdings, Inc.'s PYPL , Xoom Corporation XOOM acquisition which has received shareholder approval earlier this month. The alliance of Xoom - a pioneer in digital money transfer business - with Paypal - which makes the most of its revenues from online purchases - will create a big player in the digital payment space, where Western Union is nascent.
We, however, believe that the company's international business is the jewel in its crown. More than 80% of its agents are based internationally, where Western Union faces less competition than it does in the U.S. market.
Also, the intelligent use of capital via share buyback will back its bottom-line growth.
Western Union carries a Zacks Rank #3 (Hold). A better-ranked stock is Global Payments Inc. GPN with a Zacks Rank #2 (Buy).