Here's Why You Should Retain Western Union (WU) Stock Now
The Western Union Company WU is well poised to grow on the back of its Global Strategy and strategic alliances. The company is expected to capitalize on the global remittance market’s expansion.
Western Union — with a market cap of $5.2 billion — is a leader in global money transfer and payment services. The company’s vast platform capabilities include both digital and physical money movement networks across more than 200 countries and territories. It supports money flows in around 130 currencies.
Courtesy of solid prospects, this Zacks Rank #3 (Hold) stock is worth holding on to at the moment.
Trend in Estimates
The Zacks Consensus Estimate for Western Union’s 2022 earnings is pegged at $1.79 per share, which remained stable over the past week. During this time, it has witnessed no movement in estimate revisions. The company beat earnings estimates in three of the last four quarters and met once, the average surprise being 15.3%.
The Western Union Company Price and EPS Surprise
The Western Union Company price-eps-surprise | The Western Union Company Quote
The consensus estimate for 2022 revenues stands at $4.5 billion.
Substantial investments in building a robust digital arm are paying off for Western Union. The company is expected to capitalize on the increasing digitalization of the global economy. The company’s focus on growing economies is expected to benefit its operations in the long term.
Strategic acquisitions help the company to boost its geographical footprint and capabilities, improve products, and increase efficiency and volumes. This provides WU with a competitive edge against its peers. It also does not shy away from divesting non-core businesses to focus more on profitable operations and increase efficiency. Its new Global Strategy is expected to drive operating margin in the days ahead.
The company is divesting its Business Solutions segment for $910 million to focus more on increasing its penetration of the global cross-border consumer payments market and expanding its digital partnership business. It has already divested its Speedpay business and Paymap mortgage payments services business. These divestments also enable the company to reduce its debt level.
Western Union relies on strategic alliances and partnerships to boost the utilization of its digital platform. Winning new contracts and renewing previous agreements to enhance existing relationships highlight WU’s exceptional capabilities. Its presence in the growing global remittance market is a major positive.
The company’s shareholder-friendly moves are noteworthy. WU’s dividend yield of 6.9% is significantly higher than the average of 0.8% for the industry. In the first nine months of 2022, Western Union returned $450 million capital to its shareholders. Its new $1-billion three-year share repurchase plan will run through the end of 2024.
There are a few factors that can hold the stock back. In the trailing 12-month period, free cash flows after dividends declined 27.4%. Despite facing an improving business environment, declining free cash flows can affect its future operations.
Also, WU’s total debt-to-total capital of 83.2% at the third-quarter end was higher than the industry’s figure of 40.6%. Its high leverage ratio is concerning. Nevertheless, we believe that a systematic and strategic plan of action will drive its long-term growth.
Some better-ranked stocks in the broader Business Services space are PaySign, Inc. PAYS, Information Services Group, Inc. III and AppHarvest, Inc. APPH, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Based in Henderson, NV, PaySign offers prepaid card products and processing services. The Zacks Consensus Estimate for PAYS’ 2022 earnings indicates a 340% year-over-year surge.
Headquartered in Stamford, CT, Information Services is a global technology research and advisory company. The Zacks Consensus Estimate for III’s 2022 earnings indicates 15.9% year-over-year growth.
Morehead, KY-based AppHarvest works as an applied agricultural technology firm. The Zacks Consensus Estimate for APPH’s 2022 bottom line indicates a 13.9% year-over-year improvement.
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