NEW YORK (TheStreet) -- Western Union (WU) shares opened nearly 30% lower Wednesday following a sharply reduced outlook from the money transfer company during its release of third-quarter earnings and at least eight analysts' downgrades.
While the closing of 40% of Western Union's Mexico locations -- 7,000 in all -- due to concerns over stiffer compliance requirements may have been the immediate source of concern, analysts expressed deeper worries about management and the strategic direction of the company.
"Despite a very good brand, strong franchise and unique global assets, Western Union management just can't seem to get it right," wrote analyst Robert Napoli, in reducing his rating to "market perform." Napoli had expected shares "to decline 10% to 15% when the market opens, and because of that we are tempted to maintain our rating; however, our confidence in management execution is diminished, and we are therefore lowering our rating," he wrote.
Consumer-to-consumer transaction growth that was flat versus a year ago "marked the worst showing we have on record, even during the Great Recession," Napoli wrote. He reduced his 2013 estimates to $1.52 from $1.94, while forecasting 2014 earnings per share of $1.70.Western Union said it was lowering prices significantly in certain corridors to address competitive pressures, a move D.A. Davidson analyst John Kraft argued "carries significant risk." Kraft dropped his rating to "underperform," writing that "at a minimum 2013 will be ugly." Western Union CEO Hikmet Ersek has been trying to modernize the company to meet increasing challenges from technology-savvy competitors without sacrificing his dominant global market position. Kraft singled out Western Union's growing, but still relatively tiny, electronic-based business as a "lone bright spot," noting 25% growth. The unit now represents 4% of the company's revenues. -- Written by Dan Freed in New York. Follow @dan_freed
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV