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Western Union (WU) Q2 Earnings Meet, Iraq Results Dismal
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Shares of The Western Union Company (WU - Free Report) lost 10% since it reported second-quarter 2024 results on Jul 30. The quarterly results suffered a blow due to a revenue and operating income decline as a result of reduced Iraq contributions and increased currency volatility. Nevertheless, the Consumer Money Transfer (“CMT”) unit saw transaction growth as a result of the solid performance of the Branded Digital business. A decline in overall expenses also provided some respite to margins.
WU posted second-quarter adjusted earnings per share (EPS) of 44 cents, which matched the Zacks Consensus Estimate. However, the bottom line declined 13.7% year over year.
Total revenues of $1.1 billion fell 9% year over year on a reported basis and 7% on an adjusted basis due to lower contributions from Iraq and the divestiture of Business Solutions. The top line beat the Zacks Consensus Estimate by 0.6%.
The Western Union Company Price, Consensus and EPS Surprise
Adjusted operating margin deteriorated 280 basis points (bps) year over year to 19% due to reduced contribution from Iraq and increased foreign currency volatility. Adjusted effective tax rate remained stable year over year at 16%.
Total expenses declined 6% year over year to $875.7 million but were higher than our estimate of $853.1 million. The year-over-year decrease was due to lower costs of services and selling, general and administrative expenses. The company incurred $9.4 million in redeployment costs.
Operating income tumbled 21% year over year to $190.7 million, thereby missing our estimate of $198.3 million.
Segment Analysis
The CMT segment’s revenues fell 10% year over year to $965 million in the second quarter. Nevertheless, the metric outpaced the Zacks Consensus Estimate of $956.8 million and our estimate of $962.1 million. Operating income of $191.5 million declined 17% year over year and fell short of the consensus mark of $196 million but surpassed our estimate of $184.2 million. The operating income margin deteriorated 170 bps year over year to 19.8%.
Transactions within the CMT segment grew 4% over year on the back of 13% transaction growth in the Branded Digital business. Accounting for 24% of CMT’s revenues, Branded Digital revenues advanced 5% on a reported basis and 7% on an adjusted basis.
The CS, or Consumer Services, segment recorded revenues of $101.4 million, which climbed 21% year over year on the back of the expansion of its retail foreign exchange offerings and the sustained strong performance of its Retail Money Order business. The unit’s revenues outpaced the Zacks Consensus Estimate of $82.7 million and our estimate of $89.3 million. However, operating income of $11.1 million plunged 39% year over year and was higher than the consensus mark of $7 million. The metric, however, fell short of our estimate of $18.3 million. Operating income margin deteriorated 1,100 bps year over year to 11%.
Financial Position (as of Jun 30, 2024)
Western Union exited the second quarter with cash and cash equivalents of $1 billion, which fell 18.6% from the 2023-end level. Total assets of $8 billion slipped 2.8% from the figure at 2023 end.
Borrowings were $2.6 billion, up 5.2% from the figure as of Dec 31, 2023.
Total stockholders' equity of $440.8 million declined 8% from the 2023-end figure.
In the first half of 2024, net cash provided by operating activities declined more than four-fold from the prior-year comparable period to $60.2 million.
Capital Deployment
Western Union rewarded its shareholders with $112 million through $81.8 million in dividends and share buybacks worth $30.2 million during the second quarter.
2024 Guidance
Management continues to expect 2024 adjusted revenues to be between $4.150 billion and $4.225 billion. It expects Iraq to generate revenues in the range of $10-$30 million per quarter for the remaining part of this year.
Adjusted EPS is still anticipated to be in the range of $1.70-$1.80, the mid-point of which indicates a 0.6% improvement from the 2023 level.
Adjusted operating margin is still expected to be between 19% and 21%. The metric was 19.6% in 2023.
Of the Business Services sector players that have already released June-quarter results so far, the bottom-line results of Mastercard Incorporated (MA - Free Report) , Visa Inc. (V - Free Report) and Trane Technologies plc (TT - Free Report) beat the respective Zacks Consensus Estimate.
Mastercard reported second-quarter 2024 adjusted earnings of $3.59 per share, which outpaced the Zacks Consensus Estimate by 2.3%. The bottom line climbed 24.2% year over year. Net revenues of the leading technology company in the global payments industry amounted to $7 billion, which improved 11% year over year. The top line beat the consensus mark by 1.7%. Gross dollar volume rose 9% on a local-currency basis to $2.4 trillion. Cross-border volumes increased 17% on a local currency basis.
Switched transactions were 39.4 billion. The figure grew 11% year over year. Value-added services and solutions net revenues improved 18% year over year. Payment network rebates and incentives escalated 14% year over year. Mastercard’s clients issued 3.4 billion Mastercard and Maestro-branded cards as of Jun 30, 2024.
Visa’s third-quarter fiscal 2024 EPS of $2.42 outpaced the Zacks Consensus Estimate by a penny. The bottom line rose 12% year over year. Net revenues improved 10% year over year to $8.9 billion. However, the top line missed the consensus mark by 0.1%, a rare event for the payments giant. Visa's payments volume increased 7% year over year on a constant-dollar basis. Processed transactions grew 10% year over year to 59.3 billion and beat the consensus estimate by 0.6%.
On a constant-dollar basis, the cross-border volume of Visa climbed 14% year over year. Service revenues of $4 billion grew 8% year over year in the June quarter on the back of increased payment volumes. Data processing revenues of the company climbed 9% year over year to almost $4.5 billion. International transaction revenues amounted to almost $3.2 billion, which improved 9% year over year.
Trane Technologies reported second-quarter adjusted EPS of $3.3 surpassed the Zacks Consensus Estimate by 7.1% and increased 23.1% year over year. Revenues of $5.3 billion beat the consensus mark by 3.8% and increased 13% year over year on a reported as well as organic basis. Bookings were up 19% year over year on a reported as well as organic basis. The Americas segment’s revenues of $4.3 billion were higher than our estimate of $4 billion and increased 16% year over year on a reported as well as organic basis.
Europe, Middle East and Africa segment’s revenues were $645.3 million, up 4% year over year on a reported basis and 5% organically. Revenues from the Asia Pacific segment were $371.2 million, down 6% year over year on a reported basis and 3% on an organic basis. Adjusted operating income was $1 billion, up 21% year over year. Adjusted operating margin improved 140 basis points to 19.4%.
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Western Union (WU) Q2 Earnings Meet, Iraq Results Dismal
Shares of The Western Union Company (WU - Free Report) lost 10% since it reported second-quarter 2024 results on Jul 30. The quarterly results suffered a blow due to a revenue and operating income decline as a result of reduced Iraq contributions and increased currency volatility. Nevertheless, the Consumer Money Transfer (“CMT”) unit saw transaction growth as a result of the solid performance of the Branded Digital business. A decline in overall expenses also provided some respite to margins.
WU posted second-quarter adjusted earnings per share (EPS) of 44 cents, which matched the Zacks Consensus Estimate. However, the bottom line declined 13.7% year over year.
Total revenues of $1.1 billion fell 9% year over year on a reported basis and
7% on an adjusted basis due to lower contributions from Iraq and the divestiture of Business Solutions. The top line beat the Zacks Consensus Estimate by 0.6%.
The Western Union Company Price, Consensus and EPS Surprise
The Western Union Company price-consensus-eps-surprise-chart | The Western Union Company Quote
Q2 Performance
Adjusted operating margin deteriorated 280 basis points (bps) year over year to 19% due to reduced contribution from Iraq and increased foreign currency volatility. Adjusted effective tax rate remained stable year over year at 16%.
Total expenses declined 6% year over year to $875.7 million but were higher than our estimate of $853.1 million. The year-over-year decrease was due to lower costs of services and selling, general and administrative expenses. The company incurred $9.4 million in redeployment costs.
Operating income tumbled 21% year over year to $190.7 million, thereby missing our estimate of $198.3 million.
Segment Analysis
The CMT segment’s revenues fell 10% year over year to $965 million in the second quarter. Nevertheless, the metric outpaced the Zacks Consensus Estimate of $956.8 million and our estimate of $962.1 million. Operating income of $191.5 million declined 17% year over year and fell short of the consensus mark of $196 million but surpassed our estimate of $184.2 million. The operating income margin deteriorated 170 bps year over year to 19.8%.
Transactions within the CMT segment grew 4% over year on the back of 13% transaction growth in the Branded Digital business. Accounting for 24% of CMT’s revenues, Branded Digital revenues advanced 5% on a reported basis and 7% on an adjusted basis.
The CS, or Consumer Services, segment recorded revenues of $101.4 million, which climbed 21% year over year on the back of the expansion of its retail foreign exchange offerings and the sustained strong performance of its Retail Money Order business. The unit’s revenues outpaced the Zacks Consensus Estimate of $82.7 million and our estimate of $89.3 million. However, operating income of $11.1 million plunged 39% year over year and was higher than the consensus mark of $7 million. The metric, however, fell short of our estimate of $18.3 million. Operating income margin deteriorated 1,100 bps year over year to 11%.
Financial Position (as of Jun 30, 2024)
Western Union exited the second quarter with cash and cash equivalents of $1 billion, which fell 18.6% from the 2023-end level. Total assets of $8 billion slipped 2.8% from the figure at 2023 end.
Borrowings were $2.6 billion, up 5.2% from the figure as of Dec 31, 2023.
Total stockholders' equity of $440.8 million declined 8% from the 2023-end figure.
In the first half of 2024, net cash provided by operating activities declined more than four-fold from the prior-year comparable period to $60.2 million.
Capital Deployment
Western Union rewarded its shareholders with $112 million through $81.8 million in dividends and share buybacks worth $30.2 million during the second quarter.
2024 Guidance
Management continues to expect 2024 adjusted revenues to be between $4.150 billion and $4.225 billion. It expects Iraq to generate revenues in the range of $10-$30 million per quarter for the remaining part of this year.
Adjusted EPS is still anticipated to be in the range of $1.70-$1.80, the mid-point of which indicates a 0.6% improvement from the 2023 level.
Adjusted operating margin is still expected to be between 19% and 21%. The metric was 19.6% in 2023.
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 June-quarter results so far, the bottom-line results of Mastercard Incorporated (MA - Free Report) , Visa Inc. (V - Free Report) and Trane Technologies plc (TT - Free Report) beat the respective Zacks Consensus Estimate.
Mastercard reported second-quarter 2024 adjusted earnings of $3.59 per share, which outpaced the Zacks Consensus Estimate by 2.3%. The bottom line climbed 24.2% year over year. Net revenues of the leading technology company in the global payments industry amounted to $7 billion, which improved 11% year over year. The top line beat the consensus mark by 1.7%. Gross dollar volume rose 9% on a local-currency basis to $2.4 trillion. Cross-border volumes increased 17% on a local currency basis.
Switched transactions were 39.4 billion. The figure grew 11% year over year. Value-added services and solutions net revenues improved 18% year over year. Payment network rebates and incentives escalated 14% year over year. Mastercard’s clients issued 3.4 billion Mastercard and Maestro-branded cards as of Jun 30, 2024.
Visa’s third-quarter fiscal 2024 EPS of $2.42 outpaced the Zacks Consensus Estimate by a penny. The bottom line rose 12% year over year. Net revenues improved 10% year over year to $8.9 billion. However, the top line missed the consensus mark by 0.1%, a rare event for the payments giant. Visa's payments volume increased 7% year over year on a constant-dollar basis. Processed transactions grew 10% year over year to 59.3 billion and beat the consensus estimate by 0.6%.
On a constant-dollar basis, the cross-border volume of Visa climbed 14% year over year. Service revenues of $4 billion grew 8% year over year in the June quarter on the back of increased payment volumes. Data processing revenues of the company climbed 9% year over year to almost $4.5 billion. International transaction revenues amounted to almost $3.2 billion, which improved 9% year over year.
Trane Technologies reported second-quarter adjusted EPS of $3.3 surpassed the Zacks Consensus Estimate by 7.1% and increased 23.1% year over year. Revenues of $5.3 billion beat the consensus mark by 3.8% and increased 13% year over year on a reported as well as organic basis. Bookings were up 19% year over year on a reported as well as organic basis. The Americas segment’s revenues of $4.3 billion were higher than our estimate of $4 billion and increased 16% year over year on a reported as well as organic basis.
Europe, Middle East and Africa segment’s revenues were $645.3 million, up 4% year over year on a reported basis and 5% organically. Revenues from the Asia Pacific segment were $371.2 million, down 6% year over year on a reported basis and 3% on an organic basis. Adjusted operating income was $1 billion, up 21% year over year. Adjusted operating margin improved 140 basis points to 19.4%.