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Western Union (WU) Stock Down 5% Since Q3 Earnings Release

Shares of The Western Union Company WU have declined 5.1% since it reported third-quarter 2022 results on Nov 1. The quarterly results were hurt by lower revenues and transactions in the Consumer-to-Consumer (C2C) segment, which usually contributes a massive chunk to WU’s overall revenues.

The segment was affected by discontinuation of operations across Russia and Belarus. Nevertheless, the downside was partly offset by a lower expense level and double-digit growth in U.S. outbound new digital customer acquisition.

The Western Union Company Price, Consensus and EPS Surprise

The Western Union Company Price, Consensus and EPS Surprise
The Western Union Company Price, Consensus and EPS Surprise

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

Q3 Results

Western Union reported third-quarter 2022 adjusted earnings per share (EPS) of 42 cents, matching the Zacks Consensus Estimate. The bottom line plunged 33.3% year over year due to lower operating profit.

Total revenues fell 15% year over year on a reported basis or 6% on a constant currency basis to $1,089.6 million. Also, the top line missed the Zacks Consensus Estimate by a whisker.

Adjusted operating margin of 20.6% deteriorated 460 basis points year over year due to lower revenues, and technology and market-linked investments.

Western Union’s total expenses came in at $857.8 million, down 11% year over year. Lower cost of services, and selling, general and administrative expenses contributed to this decline in overall expenses in the third quarter.

C2C Segment

The C2C segment reported revenues of $982.4 million, which tumbled 11% year over year on a reported basis or 8% on a constant currency basis in the quarter under review. The segment’s revenue, however, fell short of the Zacks Consensus Estimate of $1,001 million.

Transactions within the C2C segment fell 12% year over year due to lower transactions across Europe and CIS, North America, East Asia and Oceania (APAC) and the Middle East, Africa and South Asia (MEASA).

Digital money transfer revenues dropped 12% year over year on a reported basis or 9% on a constant currency basis in the third quarter. Digital money transfer transactions fell 20% year over year.

Branded Digital revenues decreased 8% on a reported basis or 5% on a constant currency basis.

Balance Sheet (as of Sep 30, 2022)

Western Union exited the third quarter with cash and cash equivalents of $1,176.1 million, slipping 2.7% from the 2021-end level. Total assets of $8,901.3 million inched up 0.9% from the figure at 2021 end.

Borrowings dropped 13.2% from the figure at the 2021 end to $2,611 million.

Total stockholders' equity of $528.3 million surged 48.6% from the level as of Dec 31, 2021.

During the first nine months ended Sep 30, 2022, net cash provided by operating activities decreased 23.8% from the prior-year comparable period’s level to $522.4 million.

Capital Deployment

Western Union rewarded its shareholders with $97 million through $91 million of dividends and share buybacks worth $6 million during the third quarter.

2022 Guidance

Western Union reiterated its full-year outlook.

Adjusted revenues (constant currency, excluding the impact of Argentina inflation and proforma for the planned sale of Business Solutions) are still expected to witness a mid-single-digit decline.

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

Operating profit margin is expected between 20% and 21%. The metric stood at 22.5% in 2021.

Update on Business Solutions Sell-Off

Last year, Western Union had inked a deal with Goldfinch Partners LLC and The Baupost Group LLC to divest its Business Solutions unit in two stages. The first closing took place on Mar 1, 2022.

However, in the third quarter, with the mutual consent of all the parties to the divestiture agreement, a decision was taken to divest Business Solutions in three stages. The second closing related to the sale of the United Kingdom operations is expected in December 2022. In the third stage, the European Union operations included within the Business Solutions unit, is expected to be divested in the first quarter of 2023. Needless to say, both closings are required to fulfill the pending regulatory approvals.

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 released third-quarter results so far, the bottom-line results of Mastercard Incorporated MA, Republic Services, Inc. RSG and ManpowerGroup Inc. MAN beat the respective Zacks Consensus Estimate.

Mastercard reported third-quarter 2022 adjusted earnings of $2.68 per share, which outpaced the Zacks Consensus Estimate by 4.3%. The bottom line rose 13% year over year. MA’s revenues amounted to $5.8 billion, which rose 15% year over year in the quarter under review. The top line beat the consensus mark by 1.8%. Gross Dollar Volume (GDV) improved 11% year over year on a local-currency basis to $2.1 trillion in the third quarter.

Republic Services’ third-quarter 2022 adjusted earnings (excluding 2 cents from non-recurring items) per share of $1.34 outpaced the consensus mark by 10.7% and improved 20.7% year over year. Quarterly revenues of $3.6 billion surpassed the consensus estimate by 1.9% and increased 22.6% year over year. Revenues in RSG’s Collection segment totaled $2.43 billion, up 14.1% year over year.

Manpower Group reported third-quarter 2022 adjusted earnings of $2.21 per share, beating the consensus mark by 1.4% and improving 14.5% year over year. Revenues of $4.8 billion missed the consensus mark by 2% and decreased 6.6% year over year on a reported basis. Revenues rose 5% on a constant-currency (cc) basis and 2% on an organic cc basis. MAN’s Experis and Talent Solutions brands grew 5% and 10% year over year, respectively.


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