MoneyGram (MGI) Stock Spikes on Western Union Deal Anticipation

NEW YORK (TheStreet) -- MoneyGram International (MGI) shares are up 29.23% to $10.08 in pre-market trading on Wednesday following reports that the global money transfer service provider is in talks to be acquired by rival Western Union (WU).

MoneyGram's stock spiked in after-hours trading on Tuesday after Bloomberg first reported the story, citing sources close to the talks. Antitrust regulations are reportedly the biggest hurdle to a deal getting done, according to sources.

MoneyGram has a 5% market share while Western Union holds a 15% market share, according to the Wall Street Journal, and while the companies are currently the two biggest in the remittance industry, they are facing stiff competition from newer companies like WorldRemit, TransferWise and Walmart Stores  (WMT), according to Bloomberg.

Neither MoneyGram nor Western Union have commented on the reports today.

Western Union shares are also up 5.01% to $22 in pre-market trading today.

TheStreet Ratings team rates MONEYGRAM INTERNATIONAL INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate MONEYGRAM INTERNATIONAL INC (MGI) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."

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

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the IT Services industry. The net income has significantly decreased by 284.6% when compared to the same quarter one year ago, falling from $39.00 million to -$72.00 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 37.88%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 314.81% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • MONEYGRAM INTERNATIONAL INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, MONEYGRAM INTERNATIONAL INC increased its bottom line by earning $1.06 versus $0.73 in the prior year. For the next year, the market is expecting a contraction of 30.4% in earnings ($0.74 versus $1.06).
  • The gross profit margin for MONEYGRAM INTERNATIONAL INC is rather high; currently it is at 51.42%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, MGI's net profit margin of -21.77% significantly underperformed when compared to the industry average.
  • Despite the weak revenue results, MGI has outperformed against the industry average of 21.9%. Since the same quarter one year prior, revenues fell by 11.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: MGI Ratings Report
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