According to a February 5th report from BTIG Equity Research, there’s a good chance that shareholder activists could start a campaign at financial services firm Western Union in the next few weeks as the company gets ready to deliver its fourth quarter 2014 earnings report.

Mark Palmer and Giuliano Bologna of BTIG point out that there are several good reasons to think an activist shareholder might step up to the plate at Western Union.

They note: “The source of the activism buzz is the fact that every member of WU’s board of directors is up for re-election at its annual shareholder meeting in May after several years in which the board elections had been staggered. Combined with WU’s stagnant share price, robust cash flow (over $700mm through the first three quarters of FY14) and some investor discontent with current management, the board’s election alignment has caused investors to ask what actions an activist investor could push for.”

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Potential steps to create shareholder value in Western Union

The report highlights that among the proposed actions to create value for shareholders is the sale of its business-to-business unit or a more aggressive capital return plan. These possibilities and other issues are looming in the run up to this fourth quarter earnings call, and the analysts argue that most investors will want to see management become more aggressive in its actions (relating to Apple Pay, for example) given the threat of activism.

Compliance costs

Palmer and Bolgna note that high compliance costs were “responsible for Western Union’s lack of meaningful earnings growth in FY14.” They also note that those costs were expected to cycling through 2014 results and permit a resumption of earnings growth in FY15.

The issue of concern to investors is that management said in the third quarter conference call it expected the firm to take additional compliance actions in FY15. The BTIG analysts propose that WU management address the following questions in the fourth quarter conference call: “What impact does management believe those actions will have on Western Union’s earnings growth during the year? What is the expected run-rate of compliance costs as a percentage of revenues?”