Western Union (WU) to Report Q4 Earnings: What's in Store?

The Western Union CompanyWU is scheduled to report fourth-quarter and full-year 2016 results on Feb 9.

The company's third-quarter 2016 operating earnings per share came in line with the Zacks Consensus Estimate. Total revenues increased year over year on a constant currency basis, but decreased on reported basis. Total expense remained unchanged year over year.

Notably, the company recorded a positive earnings surprise in three of the trailing four quarters.

Western Union Company (The) Price and EPS Surprise

Western Union Company (The) Price and EPS Surprise | Western Union Company (The) Quote

Earnings Whispers

Our quantitative model doesn't call for an earnings beat this time around. Here is why:

A stock needs to have the right combination of the two key criteria - a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or 2 (Buy) or at least 3 (Hold) - for increasing chances of an earnings beat. Unfortunately, this is not the case here, as elaborated below.

You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Zacks ESP : The Earnings ESP of Western Union is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 43 cents.

Zacks Rank : Western Union's Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of a positive earnings surprise

Factors to Influence Q4 Results

Last month, Western Union made headlines after it agreed to pay $586 million to the federal government to resolve investigations tied with its oversight of certain agents and anti-fraud program as well as anti-money laundering controls (AML). The company admitted to "criminal violations including willfully failing to maintain an effective AML program and aiding and abetting wire fraud."

Owing to the settlement, Western Union expects to incur a charge of about $570 million in its fourth-quarter 2016 results. The company had stated in its release that it plans to claim a deduction for the settlement payment. However, since the tax effect is uncertain, it does not expect a related tax benefit in the fourth quarter.

Excluding the charge, the company anticipates reporting 2016 financial results in line with its financial outlook as previously provided. The company had projected 2016 EPS in the range of $1.60-$1.70.

Results should reflect revenue growth as the leading player in global money transfer anticipates slight increase in constant currency revenue. Strong U.S. business and strength in money transfer are likely to drive revenues. The company has expanded its digital assets through launch of mobile apps in Canada and other countries in Europe, giving the company 16 transactional mobile apps in the market among its 37 countries.

Also, results should get support from the U.S. to Mexico business that has outpaced market growth for principal and transactions in every quarter for the past three years. Notably, in the fourth quarter, the company substantially expanded distribution in Mexico that nearly doubled its network.

However, remittance flows from the oil producing countries will continue to be affected by the softness in oil price environment, thereby hurting the Middle East and Africa and part of the Asia Pacific region.

Also, quarterly results might exhibit increase in expenses given the company's ongoing investments in several areas, including digital technology and compliance assets and programs.

Western Union's activities during the quarter were inadequate to win analysts' confidence. As a result, the Zacks Consensus Estimate for the quarter remained unchanged at 43 cents over the last seven days.

Stocks that Warrant a Look

Here are some stocks worth considering, as they have the right combination of elements to post an earnings beat this quarter.

American International Group, Inc. AIG has an Earnings ESP of +2.46% and a Zacks Rank #3. The company is slated to release results on Feb 14.

CubeSmart CUBE has an Earnings ESP of +2.70% and carries a Zacks Rank #3. It is slated to release results on Feb 16. You can see the complete list of today's Zacks #1 Rank stocks here .

Moody's Corporation MCO will release results on Feb 17. It has an Earnings ESP of +3.57% and carries a Zacks Rank #3.

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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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