NEW YORK (TheStreet) -- Western Union (WU) defied typical market trends on Wednesday, rising 2.83% to $16.33 despite the world's largest money-transfer company posting a 27% drop in fourth-quarter profit thanks to larger compliance costs.
The company also announced a $500 million share buyback.
Net income fell to $173.4 million, or 31 cents a share, from $237.9 million, or 40 cents a share, in the same quarter a year earlier. Analysts expected earnings of 32 cents a share in the latest quarter. Revenue declined slightly to $1.42 billion.
The company also said it expects earnings per share of $1.40 to $1.50 for fiscal year 2014, matching reduced expectations from the company's third-quarter report.
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 some important positives, 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 expanding profit margins, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite the weak revenue results, WU has outperformed against the industry average of 20.5%. Since the same quarter one year prior, revenues slightly dropped by 0.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- 47.11% 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 15.21% trails the industry average.
- 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.
- In its most recent trading session, WU has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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.
- WESTERN UNION CO's earnings per share declined by 13.3% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, WESTERN UNION CO reported lower earnings of $1.69 versus $1.84 in the prior year. For the next year, the market is expecting a contraction of 15.4% in earnings ($1.43 versus $1.69).
- You can view the full analysis from the report here: WU Ratings Report