The Western Union Company Earnings: Revenue Increase Helps Margin, Net Income Climbs

S&P 500 (NYSE:SPY) component The Western Union Company (NYSE:WU) reported its results for the third quarter. Western Union is engaged in global money transfer and payment services.

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The Western Union Company Earnings Cheat Sheet

Results: Net income for the construction services rose to $269.5 million (45 cents per share) vs. $239.7 million (38 cents per share) in the same quarter a year earlier. This marks a rise of 12.4% from the year-earlier quarter.

Revenue: Rose 0.8% to $1.42 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: The Western Union Company fell in line with the mean analyst estimate of 45 cents per share. Analysts were expecting revenue of $1.45 billion.

Quoting Management: Western Union President and Chief Executive Officer Hikmet Ersek commented, “In the third quarter our revenues increased 1%. Business was challenging, as soft global economic conditions, compliance related changes, and competitive pressures in certain money transfer corridors impacted revenues. Globally, Western Union branded consumer money transfer revenue grew slightly in constant currency terms, with our on-line business once again delivering very good results. We continue to generate strong cash flow, and year-to-date we have now returned over $600 million to shareholders through share repurchase and dividends.” Ersek continued, “We are continuing to advance our growth strategies: expanding our network in consumer money transfer; adding on-line and other digital capabilities to attract new consumers; acquiring business customers and expanding geographies in our business-to-business segment; and establishing a global presence in stored value. As we have progressed through 2012, however, the market environment in consumer money transfer has become more difficult, especially in recent months. To better position us for the sustainable growth of this business we are implementing a series of strategic actions, with a focus on enhancing our value proposition, continuing to invest in the fast growing digital channels, and further optimizing our cost structure.” Ersek added, “Enhancing our value proposition will include improving the customer experience and accelerating pricing investment in certain corridors. Although these investments will negatively impact short-term financial results, we believe they are the right actions to regain market share momentum and drive long-term revenue and profit growth. Similar initiatives have delivered solid results in the past, such as with our U.S. domestic money transfer repositioning in late 2009.” Ersek added, “We remain very confident about the long-term prospects for the business. We are a leader in a growing market in consumer money transfer, and we are taking steps to enhance our position for the future. We will continue to execute our strategies in business-to-business, digital, and stored value. I am also pleased to announce our board of directors has approved a 25% increase in our dividend, to $0.50 per share annually, as well as a new $550 million share repurchase authorization, which gives us the opportunity to repurchase up to approximately $750 million of our shares through the end of 2013.”

Key Stats:

The company has now seen its net income rise for three quarters in a row. In the second quarter, net income rose 3% and in the first quarter, the figure rose 17.6%.

Revenue has risen the past four quarters. Revenue increased 4.3% to $1.43 billion in the second quarter. The figure rose 39.6% in the first quarter from the year earlier and climbed 5.5% in the fourth quarter of the last fiscal year from the year-ago quarter.

The company met estimates last quarter after topping forecasts in the previous quarter with net income of 46 cents versus a mean estimate of net income of 43 cents per share.

Looking Forward: Expectations for the fourth quarter have not changed from 45 cents. The average estimate hasn’t changed from $1.76 per share for the fiscal year.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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