After hitting a one-year low of $15.00 in August, the stock hit a one-year high of $24.83 in December. WU opened this morning at $24.35. So far today the stock has hit a low of $24.08 and a high of $25.45. As of 10:35, WU is trading at $25.43, up $2.27 (9.8%). The chart for WU looks bullish and steady, while S&P gives the stock a neutral 3 Stars (out of 5) Hold rating.
For a bullish hedged play on this stock, I would consider a November bull-put credit spread below the $20 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just five months as long as WU is above $20 at November expiration. Western Union would have to fall by more than 21% before we would start to lose money. Learn more about this type of trade here.
WU hasn't been below $20 by more than a few cents since October and has shown support around $22.50 recently. This trade could be risky if the company's earnings (due out 7/22) don't match their guidance. but even if that happens, this position could be protected by the support the stock might find at its 200 day moving average, which is currently around $22 and rising. Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in WU.
Shares of the world's largest payment transfer company, Western Union Co. (NYSE: WU), have been rallying in today's trading after the company reported a strong quarterly profit, helped by favorable exchange rates that lifted international business. Strong growth came especially from India and China, but the domestic market too provided significant revenue growth on higher demand for electronic bill payment services.
For the quarter, Western Union said that its profit jumped 7% to $207 million, or 27 cents a share, helped by strong gains from its international business. These numbers are up from $193.2 million, or 25 cents a share, reported in the same period a year earlier. Included in the company's earnings figures was $24 million related to restructuring charges. Excluding that, Western Union's earnings would have come at 29 cents per share, exceeding analysts' forecasts for a quarterly profit of 28 cents a share.
Western Union posted a respectable growth of 12% year-over-year, climbing to $1.3 billion. During the period, Western Union benefited from the slumping dollar, a major driver for its international business. Analysts expected the company show revenue of $1.24 billion in the first-quarter, according to Thomson Financial.
Western Union used to transmit telegrams like: Dear George, my office authorized a transfer of up to fifty thousand dollars to the Bailey Building & Loan STOP Then the advent of the telephone substantially reduced telegram traffic STOP
Next came the Internet and e-mail, which not only reduced telegram traffic to a crawl, it also decreased hard-copy letter writing, as the U.S. Postal Service will confirm.
Since that time The Western Union Company (NYSE: WU) has focused on its consumer money transfer service, or moneygrams, and the results have been impressive. Analysts expect 11-14% revenue growth in FY 2008 on higher transaction fees and foreign exchange fees.
While media pundits and politicians debate the pros and cons of immigration, one thing is clear -- the number of immigrants both in the U.S. and worldwide is growing rapidly. And, according to Nathan Slaughter, these workers are using money transfers to send funds back to their home countries.
In his Half-Priced Stocks newsletter, the advisor turns to Western Union (NYSE: WU) as a beneficiary of this trend. He considers the company a "venerable blue chip" that is significantly undervalued.
Slaughter notes, "With more than 300,000 agent locations worldwide, Western Union is clearly the dominant player in the money-transfer industry -- it boasts a network three times as large as its closest rival."
Meanwhile, Slaughter points out that the firm recently announced that it had joined with financial services firm Checksmart to offer its services in 263 locations. This new partnership, he points out, follows a flurry of recent deals that have seen Western Union pick up more than 1,400 locations in Mexico, Italy, and Spain.
Tthe top-ranked $45 billon TXU deal, which also includes KKR, will get eclipsed as well.
There's bound to be another mega LBO sooner rather than later. KKR, The Blackstone Group and Texas Pacific Group all have billions of dollars burning holes in their pockets.
What people seem to be forget is that these firms don't want their investments to remain private forever. Odds are good that investors will get another shot at buying shares of First Data in a few years. Maybe then being public will be back in style.
First Data should thank its lucky stars that it's being acquired by KKR.
Growth at the credit-card processing company has been slowing since it separate its Western Union payment processing business and has struggled to find a chief executive to succeed Henry C. "Ric" Duques, the Wall Street Journal said.
Duques who returned in November 2005 after his successor Charles Foote announced his retirement for "personal reasons." At the time, Duques agreed to stay for about two years to help the company find a new successor.
Investors have sat on the sidelines while First Data searched for new leadership. Its stock tanked more than 40 percent over the past year even though most Wall Street analysts rate it either a buy or a strong buy.
Analysts had said First Data would make an atractive buyout candidate for private equity. My colleague Georges Yared makes a persuasive case that the company's prospects are good.
In addition, First Data stands to profit handsomely from the private equity boon. All of those credit card purchases by investment bankers of first-class airplane tickets, suites at fancy hotels and expensive bottles of wine have to be processed somewhere, no?
MOST NOTEWORTHY: EMC Corp (EMC), Network Appliance, Inc (NTAP), ImClone Systems Inc (IMCL) and International Game Technology (IGT) were some of today's more notable upgrades:
JP Morgan upgraded EMC Corp (NYSE: EMC) to Overweight from Neutral as the firm believes improved momentum in the second-half of 2007 will drive shares higher.
Network Appliance (NASDAQ: NTAP) was also upgraded by JP Morgan, to Overweight from Neutral, as the firm believes storage will experience improving secular trends this year.
Citigroup upgraded ImClone (NASDAQ: IMCL) to Hold from Sell and raised their target to $40 from $26 due to lower competitive threats from Amgen Inc's (AMGN) Vectibix.
Prudential raised International Game Technology's (NYSE: IGT) rating to Neutral from Underweight, citing valuation.
OTHER UPGRADES:
Goldman Sachs upgraded DreamWorks Animation SKG, Inc (NYSE: : DWA) to Buy from Neutral with a $36 target and added DWA to their Americas Investment Buy List. Goldman believes the company's new films should drive a higher valuation.
Wachovia upgraded Urban Outfitters, Inc (NASDAQ: URBN) to Outperform from Market Perform after a meeting with management as they believe a turnaround is well in progress.
Wachovia upgraded Northrop Grumman Corp (NYSE: NOC) to Market Perform from Underperform on valuation.
AG Edwards upgraded Western Union Co (NYSE: WU) to Buy from Hold with a $36 target.
Friedman, Billings, Ramsey upgraded shares of Progressive Corp (NYSE: PGR) to Market Perform from Underperform on valuation.
The Western Union Co. (NYSE:WU) has over 270,000 locations globally in just about every country in the world. In fact, 80% of the locations are outside of the U.S. Western Union is perfectly positioned to enjoy the continued trend of cross-border commerce.
This company handles transfers of money between businesses, and it is the trusted global standard it sets that drives its market dominance and continued growth -- especially in the emerging markets. I am always asked how to play the China opportunity. Well, this is a way to invest in the growth of China's commerce and expanding economy. Just as Western Union is synonymous with trusted money transferring in the United States, it is the same in China, India and Latin America.
In fact, if you have ever wired money to a relative, friend or a company, chances are you used Western Union. Like Q-Tips or Band Aids, Western Union's name is virtually synonymous with its product. The company was spun off from its parent First Data Corp. (NYSE:FDC) in September 2006.
To conclude this review, I'm turning now to the most popular sector in this year's annual Top Picks report -- financial stocks. Of particular note this year is the type of financial stocks that rose to the top of the advisors' buy lists.
In past years, it was routine to see brokerage firms and large cap consumer banks among the Top Picks. This year, only one such company was chosen; Citigroup Inc. (NYSE:C) was selected as the favorite stock of both Mark Skousen and Kelley Wright.
Outside of Citi, the advisory community looked to an area that has rarely been cited in previous Top Picks reports --specialty finance companies. For example, Gordon Pape selected Brookfield Asset Management, which provides financing to real estate ventures.
Neil George chose a pair of companies spun off from Australia's Macquarie Bank. Both the Macquarie Infrastructure Trust (NYSE:MIC) and the Macquarie Infrastructure Group (OTC:MCORF) provide financing to global road, bridge, and airport development projects.
Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.
Western Union (NYSE:WU ) is the favorite speculative idea for 2007 from Paul Tracy. The editor of StreetAuthority Market Advisor notes, "The company, which dates back to the early 1850s, has one of the most recognized names around the world. Today, Western Union is a financial powerhouse, generating some $4 billion in annual revenues.
"As the world's leading money transfer specialist, the firm operates a vast global network of 270,000 agent locations spread throughout nearly 200 countries. With more than a quarter of a million locations, Western Union's network dwarfs its closest rivals by a wide margin.
"In the digital age where the Internet is an increasingly popular transaction medium and ATMs are conveniently located at seemingly every major intersection, Western Union's core money transfer services may seem to be a bit dated. However, it is easy to forget that not everyone has a bank account or online access -- particularly in developing countries.
Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.
Western Union (NYSE: WU) is the top conservative pick for 2007 from Cory Janssen. In the Investopedia Advisor, he explains, "Spun off from First Data Corp. in October, Western Union is an outstanding company to own as a long-term holding.
"Its powerful brand recognition gives it a critical advantage in an industry where customer trust is of such high importance. As well, the company's enviable distribution network leaves it very well-positioned to capitalize on the ongoing growth in international money transfers.
"The business does face some short-term risks. Recent political debate surrounding U.S. immigration policy has prompted a decline in the frequency of money transfers from the U.S. to Mexico, and this has weighed on the company's recent quarterly numbers. We feel that this is a temporary blip.
MOST NOTEWORTHY: Several online brokerage firms and RealNetworks (RNWK) topped today's list of initiations.
Morgan Stanley initiated E*Trade Financial Corp. (NYSE:ET) and TD Ameritrade Holding Corp. (NASDAQ:AMTD) with Overweight ratings while starting Charles Schwab Corp. (NASDAQ:SCHW) with an Equal Weight on valuation. The firm prefers E*Trade and TD Ameritrade based on their smaller size and earlier stages of capitalization.
RealNetworks Inc. (NASDAQ:RNWK) was assumed with an Underperform rating and $8.50 target at Jefferies; The firm considers RealNetworks' valuation expensive given the risks in the mobile and music services business.
OTHER INITIATIONS:
Crocs Inc. (NASDAQ:CROX) was initiated with a Buy rating and $51 target at Nollenberger, as they believe the Crocs' product has created a category in footwear and outgrown its fad stage.
The Western Union Co. (NYSE:WU) was started at Wachovia with a Market Perform rating; The firm expects near-term pressure on shares given the immigration reform concerns, brand repair costs and additional pricing pressure.
MOST NOTEWORTHY: Whole Foods (WFMI), Sanofi-Aventis (SNY) and Isis Pharmaceuticals (ISIS) top today's list of initiations.
Whole Foods Market, Inc. (NASDAQ:WFMI) was reinstated with an Outperform rating, raised from a Sector Perform rating, at RBC Capital Markets. The firm said expectations have been reduced and the risk/reward is favorable.
Sanofi-Aventis (NYSE:SNY) was initiated with a Buy rating and $50 target at Bank of America. The firm is positive on Sanofi's late-stage pipeline beyond Acomplia.
Isis Pharmaceuticals, Inc. (NASDAQ:ISIS) was started with a Buy and $14 target at A.G. Edwards. The firm said Isis is at an inflection point and that potential commercial opportunity for the T5000 Biosensor has been "overlooked and undervalued by investors."
OTHER INITIATIONS:
Citigroup assumed the coverage of Cardinal Health, Inc. (NYSE:CAH) with a Hold rating and $70 target.
Bear Stearns initiated Western Union Co. (NYSE:WU) with an Outperform rating and $27 target. Bear Stearns said they are positive on Western Union's powerful brand name and unique global network.
Here are some highlights from this past week's 
The Western Union Co. (NYSE:WU) has over 270,000 locations globally in just about every country in the world. In fact, 80% of the locations are outside of the U.S. Western Union is perfectly positioned to enjoy the continued trend of cross-border commerce. 
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