Western Union (WU, Financial) was incorporated in 2006 out of Englewood, Colorado. They are the worldâs largest money transfer company. Their specialities lie in money movement and global payment services. They operate in three segments: consumer to consumer, consumer to business and business solutions. The company also provides payment products that give its consumers a range of choices over methods of payments including Speedpay, Pago Facil and Western Union Payments. As of December 2014, Western Union had over 500,000 global locations over 200 countries worldwide.
Western Union recorded its best performance in nearly 24 months after reporting first quarter profits that exceeded analystsâ estimates. The worldâs largest money transfer business saw its shares rise 6.7 percent to reach $21.64. The company also recorded its third-best performance in the Standard & Poorâs 500 Index.
Western Unionâs highly improved EPS was supported by a decline in total expenses as well as fewer shares outstanding due to share buyback.
Western Union reported profits of $203.9 million with an EPS of 39 cents. This was a rise from $203 million, or an EPS of 37 cents from twelve months ago. Revenue dropped 2% to touch $1.32 billion. However, on a constant currency basis, the revenue for the quarter increased 4%. Both top and bottom line surpassed the analystsâ consensus of $0.38 a share on revenue of $1.31 billion.
Western Unionâs operating margin rose from 20.1% to 20.6% thanks to the companyâs cost-savings initiatives. The companyâs overhead expenditure dropped 1.7% while total expenses fell 2.8%.
Words from the top
Western Unionâs top management had words of positivity for both shareholders and employees.
Hikmet Ersek, CEO, President, Director and Non-Voting Member of Compliance Committee said âWe delivered a good start to the year as each of our business segments produced constant currency revenue growth. Operating margins improved and earnings per share increased 5%. These good results were achieved despite operating in a challenging global economic and geopolitical environment, including the impact of the stronger U.S. dollar. In the first quarter, Western Union consumer money transfer revenues increased 2% in constant currency terms, which was consistent with the growth in the fourth quarter of last year.â
Segmental update
Western Unionâs largest revenue contributing segment is its consumer-to-consumer business which recorded a 4% decline in sales to $1.04 billion. This segmentâs sales attribute nearly 80% to the companyâs total revenue for a quarter. However, sales relating to Consumers online at westernunion.com rose 17% with transactions growing by 25%.
Western Unionâs Business Solutions recorded $98 million worth of revenue in this quarter which fell 1% on a year-over-year basis.
The Consumer-to-Business segment showed an increase in revenues of 7% when compared on a year-over-year basis to reach $157.8 million. This segment also reported a 1% decline in operating income reaching $29.5 million.
Final Analysis
TheStreet Ratings team are currently rating Western Union Co. as a âBUYâ stock. This analysis is driven by the companyâs long list of strengths which will have a much profound impact than any of its weaknesses while giving investors an enhanced performance opportunity than most stocks covered. Some of Western Unionâs strengths in the past quarters have been its solid stock price performance, growth in earnings per share, increase in net income, attractive valuation levels and increasing profit margins. The weaknesses include high debt management risk which should be outweighed by the positives.
