Yahoo Finance Why Is Western Union (WU) Down 3.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Western Union (WU). Shares have lost about 3.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Western Union due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Western Union Q1 Earnings Beat on Branded Digital Strength
Western Union posted robust first-quarter 2024 results, driven by the Branded Digital business' resilience, growth in transactions, solid Consumer Money Transfer business performance and stabilization of the retail business. This solid performance prompted the company to raise its full-year outlook. However, increased expenses tempered some of the gains.
It announced first-quarter 2024 adjusted earnings per share (EPS) of 45 cents, which beat the Zacks Consensus Estimate by 12.5%. The bottom line rose nearly 5% year over year.
Total revenues increased more than 1% year over year on a reported basis, or 3% on an adjusted basis, to nearly $1.05 billion. The top line beat the Zacks Consensus Estimate by 3.9%.
Let’s delve deeper.
Q1 Performance
Adjusted operating margin of 19.7% deteriorated 80 basis points year over year due to the timing of marketing expenses and increased redeployment costs. The first-quarter adjusted effective tax rate of 15.6% was higher than 13.5% in the year-ago period, due to the impact of Business Solutions divestment.
Western Union’s total expenses were $857 million, up 3% year over year due to higher costs of services and selling, general and administrative expenses. The company incurred $14 million in the first quarter in redeployment costs. Operating income of $192.1 million declined 6% year over year.
Segment Analysis
The CMT or Consumer Money Transfer segment reported revenues of $962 million, which increased 3% year over year in the quarter under review. The figure beat our estimate by 4.2%. Operating income improved 6% year over year to $187.6 million and comfortably beat our estimate. The operating income margin of 19.5% rose from 18.9% a year ago.
Transactions within the CMT segment increased 6% year over year on the back of strong Latin American and Caribbean regions, the Middle East, Africa, South Asia and North America. This metric surpassed our estimate by 1.5%. An improvement of 13% in Branded Digital transactions also added to the upside. Branded Digital revenues increased 9% on a reported and adjusted basis.
The CS or Consumer Services segment reported revenues of $87.1 million, which increased 5% year over year on Retail Money Order business strength. The segment’s revenues beat our estimate by 3.6%. However, operating income declined 42% year over year to $18.6 million and significantly missed our estimate. The operating income margin of 21.3% fell from 38.6% a year ago.
Financial Position (as of Mar 31, 2024)
Western Union exited the first quarter with cash and cash equivalents of $1.1 billion, decreasing from the 2023-end level of $1.3 billion. Total assets of $8.1 billion declined from $8.2 billion at 2023-end.
Borrowings remained stable at around $2.5 billion.
Total stockholders' equity of $397.9 million decreased from $479 million as of Dec 31, 2023.
In the first quarter, net cash provided by operating activities declined to $94 million from $137.3 million a year ago.
Capital Deployment
Western Union rewarded its shareholders with $230 million through $80 million in dividends and share buybacks worth $150 million during the first quarter.
2024 Guidance
The company now expects 2024 adjusted revenues between $4.150 and $4.225 billion, up from previous guidance of $4.1 and $4.2 billion but still declining from the 2023 figure of $4.4 billion. It also expects Iraq to generate revenues toward the upper limit of the guided range of $50-$100 million in 2024.
Adjusted EPS is anticipated to be in the range of $1.70-$1.80 for 2024, up from previous guidance of $1.65-$1.75 compared with the 2023 reported figure of $1.74 per share. The company expects its growth rate in the second quarter to stay low sequentially due to a benefit from Iraq received last year.
Adjusted operating margin is still expected to be between 19% and 21%. The metric stood at 19.6% in 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Western Union has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Western Union has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Western Union is part of the Zacks Financial Transaction Services industry. Over the past month, Equifax (EFX), a stock from the same industry, has gained 4.8%. The company reported its results for the quarter ended March 2024 more than a month ago.
Equifax reported revenues of $1.39 billion in the last reported quarter, representing a year-over-year change of +6.7%. EPS of $1.50 for the same period compares with $1.43 a year ago.
For the current quarter, Equifax is expected to post earnings of $1.74 per share, indicating a change of +1.8% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.1% over the last 30 days.
Equifax has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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The Western Union Company (WU) : Free Stock Analysis Report
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