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Will a Weak CMT Unit Hamper Western Union's (WU) Q1 Earnings?

The Western Union Company WU is scheduled to release first-quarter 2024 results on Apr 24, 2024, after market close.

Q1 Estimates

The Zacks Consensus Estimate for Western Union’s first-quarter earnings per share is pegged at 40 cents, indicating a decline of 7% from the year-ago quarter’s reported figure.

The consensus mark for revenues is pegged at $1 billion, suggesting a 2.7% fall from the year-ago quarter’s reported number.

Earnings Surprise History

Western Union’s bottom line beat estimates in each of the trailing four quarters, the average surprise being 20.11%. This is depicted in the chart below:

The Western Union Company Price and EPS Surprise

 

The Western Union Company Price and EPS Surprise
The Western Union Company Price and EPS Surprise

The Western Union Company price-eps-surprise | The Western Union Company Quote

 

Factors to Note

In the first quarter, revenues of Western Union are expected to have benefited on the back of its digital business strength and a stable retail business. This, in turn, is likely to have been driven by favorable transaction trends.

The East Asia and Oceania (APAC) region is likely to have contributed to Western Union’s digital business on the back of new customer gains and solid digital conversion rates.

However, revenues in the Consumer Money Transfer (CMT) segment, previously referred to as the Consumer-to-Consumer unit, are likely to have suffered a blow due to weakness in business across Europe and the Commonwealth of Independent States, and North America. Nevertheless, the upside is likely to have been partly offset by growing revenues from the Middle East, Africa and South Asia, and Latin America and the Caribbean regions.

The Zacks Consensus Estimate for the CMT unit’s revenues is pegged at $921 million, which indicates a 1.8% decline from the year-ago quarter’s reported figure. We expect it to decrease 1.6% year over year in the first quarter. Our estimate for the segment’s operating income suggests a 12.6% fall year over year.

Meanwhile, strength in the products and services suite encompassing retail money orders, bill payments, prepaid cards, lending products and foreign currency exchange is expected to have driven revenues of the Consumer Services segment in the to-be-reported quarter.

The Zacks Consensus Estimate for revenues in the Consumer Services unit is at $87 million, which implies a 4.8% rise from the year-ago quarter’s reported number. We expect it to increase 1% year over year in the first quarter. Our estimate suggests the segment’s operating income to witness 8.8% year-over-year growth.  

WU’s margins are likely to have received some respite in the to-be-reported quarter on the back of the company’s cost-curbing initiatives in the form of an operating expense redeployment program. We expect total operating costs to decline 1% year over year in the first quarter due to an estimated 1.3% year-over-year decline in the cost of services.

What Our Quantitative Model Predicts

Our proven model does not conclusively predict an earnings beat for Western Union this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here, as you see below.

Earnings ESP: Western Union has an Earnings ESP of 0.00%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

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Zacks Rank: WU currently has a Zacks Rank #4 (Sell).

Stocks to Consider

While an earnings beat looks uncertain for Western Union, here are some companies from the Business Services space, which according to our model, have the right combination of elements to beat on earnings this time around:

APi Group Corporation APG has an Earnings ESP of +2.06% and a Zacks Rank of 1, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for APG’s first-quarter 2024 earnings is pegged at 32 cents per share, which indicates an improvement of 28% from the year-ago quarter’s reported figure.

APi Group’s bottom line beat estimates in each of the trailing four quarters, the average surprise being 5.05%.

CRA International, Inc. CRAI has an Earnings ESP of +0.54% and a Zacks Rank of 2, at present. The Zacks Consensus Estimate for CRAI’s first-quarter 2024 earnings is pegged at $1.39 per share, suggesting 7.8% growth from the year-ago quarter’s reported figure.

CRA International’s bottom line beat estimates in two of the trailing four quarters and missed the mark twice, the average surprise being 8.06%.

Envestnet, Inc. ENV has an Earnings ESP of +1.23% and a Zacks Rank of 3, at present. The Zacks Consensus Estimate for ENV’s first-quarter 2024 earnings is pegged at 54 cents per share, which indicates an improvement of 17.4% from the year-ago quarter’s reported figure.

Envestnet’s earnings beat estimates in three of the trailing four quarters and matched the mark once, the average surprise being 7.72%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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