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Here's Why You Should Retain Western Union Stock for Now
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The Western Union Company (WU - Free Report) , a renowned name in the global payments industry, offers robust services in money transfer and payment solutions. With rising transaction volumes and resilience in its Branded Digital business, the company is poised for growth. Strong performance in Latin America, Caribbean region and North America are supporting its Consumer Money Transfer segment’s growth.
Headquartered in Denver, CO, WU currently has a market cap of $4.1 billion. In the year-to-date period, Western Union shares have gained 2.3% compared with the industry's 9% growth. However, we expect it’s EVOLVE 2025 strategy and shift to digital money transfer business to aid the stock’s performance going forward. Notably, its forward 12-month price-to-earnings ratio of 6.69X is significantly lower than the industry average of 22.75X, indicating that the stock is more affordable.
Image Source: Zacks Investment Research
WU Estimate Revisions Trend
The Zacks Consensus Estimate for Western Union’s current-year earnings is pegged at $1.77 per share, indicating an increase of 1.7% from the year-ago period’s level. It has witnessed two upward estimate revisions in the past month against no movement in the opposite direction. The consensus estimate for 2025 earnings signals a 4.8% further gain. WU beat on earnings in three of the last four quarters, meeting once, the average surprise being 7.1%. The consensus estimate for Western Union’s current-year revenues stands at $4.2 billion.
Image Source: Zacks Investment Research
WU’s Growth Prospects
We expect its Consumer Services business to play a significant role in revenue generation. Our model implies that revenues from the unit will jump 10% year over year in 2024. However, we expect Consumer Money Transfer revenues to decline 5.3% year over year in 2024.
The company is focusing on growing its digital money transfer service to adapt to changing dynamics. The decline in its core traditional money transfer business might impact the company in the near term. However, its ongoing digital transition may act as a partial offset.
Management expects to expand its Consumer Services segment and targets double-digit growth in this segment. Since the margin profile of this segment is attractive, further growth may positively impact WU’s bottom line in the future.
Collaborations with fintechs and financial institutions are enhancing Western Union's service offerings. Its partnerships with Katapulk Marketplace, Visa and Tencent, should help the company in sustaining transaction volumes. Innovations like Send Now, Pay Later, which integrate lending and remittance, are expected to help the company better penetrate new and existing markets. WU’s extensive global network, spanning more than 200 countries and territories, further strengthens its market position and accessibility.
Western Union's attractive dividend yield, currently at 7.7% compared to the industry average of 0.7%, is likely to garner significant investor interest. In the second quarter, the company rewarded its shareholders with $81.8 million in dividend payments and share buybacks totaling $30.2 million.
As of June 30, 2024, WU had $172 million remaining in share repurchase authorization through the end of the year. Last year, Western Union returned $646 million to its shareholders through buybacks and dividends, highlighting the company’s commitment to the value of its shareholders. Courtesy of solid prospects, this Zacks Rank #3 (Hold) stock is worth holding on at the moment.
WU’s Risks
However, there are some factors that investors should keep a careful eye on.
WU’s levered balance sheet is concerning. Its total debt-to-total capital of 85.7% at the second-quarter end is significantly higher than the industry’s figure of 41.4%. Also, intensifying competition in the money transfer market with the rise of low-cost digital payment platforms is posing a significant threat to the company’s growth prospects. Nevertheless, we believe that its systematic and strategic plan of action will drive growth and improve profitability further in the long term.
The Zacks Consensus Estimate for Duolingo’s 2024 earnings is currently pegged at $1.87 per share, indicating 434.3% year-over-year growth. It beat estimates in each of the past four quarters with an average surprise of 92.1%. The consensus mark for DUOL’s revenues of $736.1 million suggests a 38.6% increase from the year-ago level.
The Zacks Consensus Estimate for CRA International’s current-year earnings is now pegged at $6.93 per share, indicating 26.9% year-over-year growth. It beat earnings estimates thrice in the past four quarters and missed once, with an average surprise of 23.5%. The consensus mark for CRAI revenues of $674.7 million suggests a 8.1% increase from the year-ago level.
The Zacks Consensus Estimate for Remitly Global’s 2024 loss of $0.30 per share suggests 53.9% year-over-year growth. It beat earnings estimates twice in the past four quarters and met twice, with an average surprise of 8%. The consensus estimate for RELY’s current year revenues is pegged at $1.2 billion, indicating a 31.8% increase from a year ago.
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Here's Why You Should Retain Western Union Stock for Now
The Western Union Company (WU - Free Report) , a renowned name in the global payments industry, offers robust services in money transfer and payment solutions. With rising transaction volumes and resilience in its Branded Digital business, the company is poised for growth. Strong performance in Latin America, Caribbean region and North America are supporting its Consumer Money Transfer segment’s growth.
Headquartered in Denver, CO, WU currently has a market cap of $4.1 billion. In the year-to-date period, Western Union shares have gained 2.3% compared with the industry's 9% growth. However, we expect it’s EVOLVE 2025 strategy and shift to digital money transfer business to aid the stock’s performance going forward. Notably, its forward 12-month price-to-earnings ratio of 6.69X is significantly lower than the industry average of 22.75X, indicating that the stock is more affordable.
Image Source: Zacks Investment Research
WU Estimate Revisions Trend
The Zacks Consensus Estimate for Western Union’s current-year earnings is pegged at $1.77 per share, indicating an increase of 1.7% from the year-ago period’s level. It has witnessed two upward estimate revisions in the past month against no movement in the opposite direction. The consensus estimate for 2025 earnings signals a 4.8% further gain. WU beat on earnings in three of the last four quarters, meeting once, the average surprise being 7.1%. The consensus estimate for Western Union’s current-year revenues stands at $4.2 billion.
Image Source: Zacks Investment Research
WU’s Growth Prospects
We expect its Consumer Services business to play a significant role in revenue generation. Our model implies that revenues from the unit will jump 10% year over year in 2024. However, we expect Consumer Money Transfer revenues to decline 5.3% year over year in 2024.
The company is focusing on growing its digital money transfer service to adapt to changing dynamics. The decline in its core traditional money transfer business might impact the company in the near term. However, its ongoing digital transition may act as a partial offset.
Management expects to expand its Consumer Services segment and targets double-digit growth in this segment. Since the margin profile of this segment is attractive, further growth may positively impact WU’s bottom line in the future.
Collaborations with fintechs and financial institutions are enhancing Western Union's service offerings. Its partnerships with Katapulk Marketplace, Visa and Tencent, should help the company in sustaining transaction volumes. Innovations like Send Now, Pay Later, which integrate lending and remittance, are expected to help the company better penetrate new and existing markets. WU’s extensive global network, spanning more than 200 countries and territories, further strengthens its market position and accessibility.
Western Union's attractive dividend yield, currently at 7.7% compared to the industry average of 0.7%, is likely to garner significant investor interest. In the second quarter, the company rewarded its shareholders with $81.8 million in dividend payments and share buybacks totaling $30.2 million.
As of June 30, 2024, WU had $172 million remaining in share repurchase authorization through the end of the year. Last year, Western Union returned $646 million to its shareholders through buybacks and dividends, highlighting the company’s commitment to the value of its shareholders. Courtesy of solid prospects, this Zacks Rank #3 (Hold) stock is worth holding on at the moment.
WU’s Risks
However, there are some factors that investors should keep a careful eye on.
WU’s levered balance sheet is concerning. Its total debt-to-total capital of 85.7% at the second-quarter end is significantly higher than the industry’s figure of 41.4%. Also, intensifying competition in the money transfer market with the rise of low-cost digital payment platforms is posing a significant threat to the company’s growth prospects. Nevertheless, we believe that its systematic and strategic plan of action will drive growth and improve profitability further in the long term.
Key Picks
Investors interested in the broader Business Services space can look at some better-ranked stocks like Duolingo, Inc. (DUOL - Free Report) , CRA International, Inc. (CRAI - Free Report) and Remitly Global, Inc. (RELY - Free Report) . Duolingo and CRA International sport a Zacks Rank #1 (Strong Buy), while Remitly Global carries a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Duolingo’s 2024 earnings is currently pegged at $1.87 per share, indicating 434.3% year-over-year growth. It beat estimates in each of the past four quarters with an average surprise of 92.1%. The consensus mark for DUOL’s revenues of $736.1 million suggests a 38.6% increase from the year-ago level.
The Zacks Consensus Estimate for CRA International’s current-year earnings is now pegged at $6.93 per share, indicating 26.9% year-over-year growth. It beat earnings estimates thrice in the past four quarters and missed once, with an average surprise of 23.5%. The consensus mark for CRAI revenues of $674.7 million suggests a 8.1% increase from the year-ago level.
The Zacks Consensus Estimate for Remitly Global’s 2024 loss of $0.30 per share suggests 53.9% year-over-year growth. It beat earnings estimates twice in the past four quarters and met twice, with an average surprise of 8%. The consensus estimate for RELY’s current year revenues is pegged at $1.2 billion, indicating a 31.8% increase from a year ago.