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Western Union

(WU) - Get Report

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

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