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Western Union (WU) Stock Down 5% Despite Q2 Earnings Beat

Shares of The Western Union Company WU have declined 4.9% since it reported second-quarter 2022 results on Aug 3. The quarterly results were hurt by discontinuation of operations across Russia and Belarus, which adversely impacted WU’s digital money transfer revenues, and a higher effective tax rate. Nevertheless, the downside was partly offset by decline in expenses in the quarter under review.

Q2 Results

Western Union reported second-quarter 2022 earnings per share of 51 cents, which outpaced the Zacks Consensus Estimate by 24.4%. The bottom line rose 6.3% year over year.

WU’s earnings gained momentum from improved operating margin and reduced share count.

Total revenues of $1,138 million slumped 12% year over year on a reported basis and 4% on a constant currency basis in the second quarter. The top line beat the Zacks Consensus Estimate by a whisker.

Adjusted operating margin expanded 310 basis points year over year to 23.3% on the back of changes in foreign currency, reduced compensation-related expenses and product mix.

The Western Union Company Price, Consensus and EPS Surprise

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

Other Quarterly Results

Western Union’s total expenses decreased 16% year over year to $874.3 million, thanks to lower cost of services, and selling, general and administrative expenses.

The Consumer-to-Consumer (C2C) segment, that usually contributes the most to WU’s revenues, decreased 9% year over year on a reported basis and 6% on a constant currency basis in the quarter under review. Meanwhile, transactions slipped 13% year over year due to reduced transactions across Europe and CIS, North America and APAC.

Digital money transfer revenues fell 6% year over year on a reported basis and 3% on a constant currency basis. The metric accounted for 25% and 33% of overall C2C revenues and transactions, respectively.

Revenues of Westernunion.com dipped 1% year over year on a reported basis but inched up 1% on a constant currency basis. The revenue comprised 1% cross-border revenue growth.

Balance Sheet (as of Jun 30, 2022)

Western Union exited the second quarter with cash and cash equivalents of $1,201.9 million, which dipped 0.5% from the 2021-end level.

Borrowings declined 10.4% from the figure at the 2021-end to $2,695.3 million.

Total stockholders' equity of $448.3 million increased 26.1% from the level as of Dec 31, 2021.

During the six months ended Jun 30, 2022, net cash provided by operating activities fell 12.2% from the prior-year comparable period to $306.8 million.

Capital Deployment

Western Union rewarded $112 million to shareholders to the tune of $91 million through dividends and share buybacks of $21 million during the second quarter.

2022 Guidance Revised

Western Union altered its 2022 guidance, considering several factors such as the timing of expenses, better-than-expected cost management on a year-to-date basis and weaker top-line trends.

Adjusted revenues (constant currency, excluding the impact of Argentina inflation and proforma for the planned sale of Business Solutions) are now expected to witness mid-single-digit decline, while the previous view estimated the metric to witness low-single-digit decline.

Adjusted EPS is still anticipated within $1.75 and $1.85 for 2022. The mid-point of the guidance indicates 17.8% decline from the 2021 reported figure.

Operating profit margin is expected between 20% and 21%, up from the prior forecast of roughly 20%. The metric stood at 22.5% in 2021.

Zacks Rank

Western Union currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Business Services Sector Releases

Of the Business Services sector players that have already released second-quarter results so far, the bottom line of Mastercard Incorporated MA, Robert Half International Inc. RHI and Fiserv, Inc. FISV beat the Zacks Consensus Estimate.

Mastercard reported second-quarter 2022 earnings of $2.56 per share, which beat the Zacks Consensus Estimate by 8.5%. The bottom line climbed 31% year over year. Net revenues of Mastercard improved 21% year over year to $5.5 billion in the quarter under review. The top line outpaced the consensus mark by 4.3%. MA's gross dollar volume rose 14% year over year on a local-currency basis to $2.1 trillion in the second quarter.

Robert Half’s quarterly earnings of $1.6 per share beat the consensus mark by 0.6% and improved 20.3% year over year. RHI’s revenues of $1.86 billion missed the consensus mark by 1.8% but increased 17.9% year over year on a reported basis and 20% on an as-adjusted basis. Adjusted gross profit of Robert Half in the quarter was $804.1 million, up 20.2% year over year.

Fiserv reported adjusted earnings (excluding 64 cents from non-recurring items) per share of $1.56, which beat the consensus mark by 1.3% and increased 14% year over year. FISV’s adjusted revenues of $4.23 billion beat the consensus mark by 4.1% and increased 4.5% year over year. Organic revenue growth of Fiserv was 12% in the quarter, driven by a 17% surge in the Acceptance segment, a 7% increase in the Fintech segment and an 8% improvement in the Payments segment.


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