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Why Western Union (WU) Stock Is Down After-Hours Today

Stocks in this article: WU

NEW YORK (TheStreet) -- Western Union (WU) was falling 0.2% to $15.80 in after-hours trading Thursday despite beating analysts' expectations for earnings in the first quarter.

For the first quarter Western Union reported earnings of 37 cents a share, beating analysts' estimates of 35 cent a share by 2 cents. Revenue increased 1.5% from the year-ago quarter to $1.35 billion. Analysts surveyed by Thomson Reuters expected revenue of $1.36 billion for the quarter.

Consumer-to-consume revenue increased 3%, or 4% constant currency, in the quarter. Consumer-to-business fell -4%, or increased 7% constant currency. The difference between reported and constant currency revenue changes in consumer-to-business revenue was mostly due to the devaluation of the Argentine peso.

"We are pleased with the improved trends in our business," president and CEO Hikmet Ersek said in a press release. "Our core money transfer business continued to rebound, and key growth areas such as westernunion.com and Western Union Business Solutions delivered strong performance."

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TheStreet Ratings team rates WESTERN UNION CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate WESTERN UNION CO (WU) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Despite the weak revenue results, WU has outperformed against the industry average of 18.2%. Since the same quarter one year prior, revenues slightly dropped by 0.2%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • 45.82% is the gross profit margin for WESTERN UNION CO which we consider to be strong. Regardless of WU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 12.19% trails the industry average.
  • WESTERN UNION CO's earnings per share declined by 22.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, WESTERN UNION CO reported lower earnings of $1.43 versus $1.69 in the prior year. This year, the market expects an improvement in earnings ($1.44 versus $1.43).
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the IT Services industry and the overall market, WESTERN UNION CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: WU Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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