Western Union Shares Fall To 3-Year Low On Reduced Earnings Forecast

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Shares of the world’s largest money transfer firm, The Western Union Company (NYSE:WU), fell to their lowest point since March 2009, after the company lowered its outlook for 2012. On Tuesday, Western Union lowered its estimates for the full-year in the range of $1.60 to $1.63, from the earlier projection of $1.68 to $1.72 per share. The average estimate of analysts polled by FactSet was $1.75 per share.

Western Union Shares Fall To 3-Year Low On Reduced Earnings Forecast

The Western Union Company (NYSE:WU) reported third quarter revenue of $1.42 billion, with EPS of 46 cents per share. Analysts were expecting 45 cents in earnings, on revenue of $1.47 billion. The company also said that Stewart Stockdale, head of its consumer financial services business, has left the company.

The shares plunged $5.03, or 28.1 percent, to $12.48 today. The Western Union Company (NYSE:WU) shares are down 1.8 percent this year as of October 26, compared to a 12 percent increase in the S&P index. Yesterday, the company said in a statement that its operating income could decline 10-15 percent in 2013 from 2012 levels, due to actions aimed at cutting costs, investing in digital technology, and adding new customers.

“Business was challenging, as soft global economic conditions, compliance related changes, and competitive pressures in certain money transfer corridors impacted revenues,” said CEO Hikmet Ersek.

A Citigroup Inc. (NYSE:C) analyst, Ashwin Shirvaikar, said Western Union’s third quarter performance was lackluster, as it continued to face increased competition and tough economic conditions. The analyst said that lowered estimates indicate that the earnings per share would decline next year.

Shirvaikar said that the company’s poor fundamental and recently announced strategic changes add uncertainty about the future prospects and create fears regarding the long-term competitive positioning. Citigroup Inc. (NYSE:C) maintains a buy rating, with a $24 price target for Western Union.

Andrew Jeffrey, a senior analyst at SunTrust Banks, Inc. (NYSE:STI), said today that he has downgraded The Western Union Company (NYSE:WU) shares from buy to neutral. “Some competitive pressure is coming from new entrants, while much is likely from traditional participants,’ he said.

However, the Englewood, Colorado-based company showed a positive sign, by announcing a $750 million share repurchase plan, and increasing the annual dividend by 25 percent to 50 cents per share.

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