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Western Union (WU) Q4 Earnings Meet Estimates, Revenues Miss

The Western Union Company WU reported fourth-quarter 2018 operating earnings of 49 cents per share, in line with the Zacks Consensus Estimate and up 19.5% year over year.

The growth in adjusted earnings per share was primarily due to an increase in operating profit margin, a lower effective tax rate and fewer shares outstanding, partially offset by lower revenues.

Full-Year Details

Total revenues in 2018 were $5.59 billion, up 3% on a constant currency basis and was within the company guided revenue growth range of low-to- mid single digits.

Earnings per share came in at $1.87, lower than  the company’s guided range of $1.88-$1.95 .

The Western Union Company Price, Consensus and EPS Surprise

Behind the Headlines

Total revenues of nearly $1.4 billion missed the Zacks Consensus Estimate by 1.7% and declined 3% on a year-over-year basis or 2% on a constant currency basis. Weakening of Argentine Peso led to a decline in revenues but an increase in revenue per transaction in the company’s Argentina-based businesses aided the top line.

Total operating expense of $1.13 billion was down 33% year over year due to a decline in selling, general and administrative expenses.

Segment Update

Consumer-to-Consumer (C2C)

Revenues for the segment declined 1% on a reported basis and increased 1% on constant currency to $1.13 billion, led by higher transactions. Total transactions grew 4%, driven by strength at westernunion.com.

Revenues from westernunion.com C2C improved 21% on a reported basis and 22% on a constant currency basis. Revenues rose on the back of 25% transaction growth. Notably, westernunion.com represented 12% of total C2C revenues in the quarter under review.

Business Solutions

Revenues increased 3% on a normal basis and 5% on a constant currency basis year over year to $96.8 million, driven by growth in both payments and foreign exchange services.

The segment reported operating income of $5.2 million as against operating loss of 3 million in the year-ago quarter.

Other

Other segment primarily consists of the U.S. and Argentina bill payments businesses. Revenues slipped 11% but increased 10% on a constant currency basis to $177.1 million.

Operating income declined 80% to $3.3 million and operating margin contracted 610 bps to 1.8%, both on a year-over-year basis.

Balance Sheet

Cash and cash equivalents as of Dec 31, 2018 were $973.4 million, up 16.2% year over year.

As of Dec 31, borrowings rose nearly 13.2% year over year to $3.4 billion.

As of Dec 31, 2018, stockholders' equity was a deficit of $309.8 million compared with stockholder’s equity deficit of $491.4 million at year-end 2017.

Net cash from operations totaled $821.3 million up 10.7% year over year.

Share Repurchase & Dividend Update

In the reported quarter, the company returned $49 million in share buybacks to its shareholders.

The company announced a dividend of 20 cents per share, which represents a 5% increase over the previous dividend of 19 cents. The dividend is payable on Mar 29, 2019 to shareholders of record at the close of business on Mar 15, 2019.

2019 Guidance Update

The company expects revenue growth of low single digit (on a constant currency basis), operating margin of approximately 20%, EPS in a range of $1.83 to $1.95 and cash flow from operating activities of approximately $1 billion.

Zacks Rank and Performance of Other Stocks

Western Union carries a Zacks Rank #3 (Hold).

You can see https://www.zacks.com/stocks/buy-list/?ADID=zp_1link&ICI... _1link">the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other Financial Transaction Services providers, Fiserv Inc. FISV, Mastercard Inc. MA and Total System Services, Inc. TSS each beat their respective Zacks Consensus Estimate in the fourth quarter.

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