Western Union Company (NYSE: WU) provides a range of money transfer and bill payment services worldwide. Its consumer-to-consumer operations involve multi-currency and real-time processing systems for walk-in, online, and telephone money transfers. Its consumer-to-business operations enable payments to utilities, auto finance companies, mortgage servicers, financial service providers, and governmental agencies. The firm also offers money order products and advance payment services. Western Union does business through a network of more than 345,000 locations, in over 200 countries and territories.
Investors were pleased last week, when the company guided Y08 EPS to the higher end of the range $1.25-$1.29 and revenues to the higher end of the range $5.341-$5.439 billion. Analysts had been expecting $1.28 and $5.420 billion. Management also raised its long-term EPS growth objective from 12-14% to 15-18%, reaffirmed its long-term revenue growth objective of 10-12%, and announced that the board had authorized an additional $1 billion for share repurchases.
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.
Western Union Company (NYSE: WU) provides a range of money transfer and bill payment services worldwide. Its consumer-to-consumer operations involve multi-currency and real-time processing systems for walk-in, online, and telephone money transfers. Its consumer-to-business operations enable payments to utilities, auto finance companies, mortgage servicers, financial service providers, and governmental agencies. The firm also offers money order products and advance payment services. Western Union does business through a network of more than 335,000 locations, in over 200 countries and territories.
Investors were pleased with the company's steady results last week, when it reported Q4 EPS of 32 cents and revenues of $1.31 billion. Analysts had been looking for 31 cents and $1.3 billion. Management also guided FY08 EPS to $1.24-$1.28 ($1.26 consensus) and FY08 revenues to $5.34-$5.44 billion ($5.39B consensus). Goldman Sachs Asset Management noted that it held a 6.1 percent stake in the issue.
MOST NOTEWORTHY: Biogen Idec, Western Union and Tibco were today's noteworthy upgrades:
Banc of America upgraded shares of Biogen Idec (NASDAQ: BIIB) to Buy from Neutral as they believe the company's three year growth strategy and the approval of Tysabri for the treatment of Crohn's disease will support a higher valuation.
Oppenheimer upgraded Western Union (NYSE: WU) to Outperform from Perform, citing improving operating margins, easing comps, and improvement in Mexico.
Tibco Software (NASDAQ: TIBX) was raised to Buy from Hold at Citigroup. The firm upgraded shares following the acquisition of BEA Systems (NASDAQ: BEAS) to reflect the company's takeout potential and limited downside.
OTHER UPGRADES:
Royal Ahold (OTC: AHONY) was upgraded to Hold from Sell at Deutsche Bank.
Bear upgraded eBay (NASDAQ: EBAY) to Outperform from Peer Perform.
Morgan Stanley raised Boston Scientific (NYSE: BSX) to Overweight from Equal Weight.
Do you know which company introduced the first consumer charge card? No? It also introduced the first successful stock ticker and was one of the original eleven stocks in the Dow Jones Average. Still no? What if I say that it completed the first transcontinental telegraph line across North America? Now you have it! Of course, the telegram is a memory.
Western Union Company (NYSE: WU) provides a range of money transfer and bill payment services worldwide. Its consumer-to-consumer operations involve multi-currency and real-time processing systems for walk-in, online, and telephone money transfers. Its consumer-to-business operations enable payments to utilities, auto finance companies, mortgage servicers, financial service providers, and governmental agencies. The firm also offers money order products and advance payment services. Western Union does business through a network of more than 320,000 locations, in over 200 countries and territories.
Investors were pleased last week, when the company reported Q3 EPS of 30 cents and revenues of $1.26 billion. The Street had been looking for 28 cents and $1.26 billion. D.A. Davidson subsequently upgraded the shares to "buy," noting improved business in Mexico and optimism over newer relationships with Wal-Mart Stores Inc. (NYSE: WMT) and Google Inc. (NASDAQ: GOOG). Management also guided FY07 EPS to $1.11-$1.13, versus consensus of $1.08. The share price popped on the news and then moved into a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
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.
As credit card and debit card usage continues to soar, domestically and on a global scale, payment processing service companies stand to benefit. I am impressed by Global Payments Inc. (NYSE: GPN). Over the last three years, Global has had a 21% compound annual growth rate, and I feel there is still room to continue its recent success.
Nearly 87% of Global's revenues come from its merchant services segment. While Global is dwarfed compared to giants in the industry like First Data Corp. (NYSE: FDC) and Western Union Co. (NYSE: WU), it cleverly uses its nimble size to focus on small, independent merchants, or those generating less than $300,000 in purchase volume a year. Through Global, these merchants are able to process credit and debit cards, and each time a card is used, Global makes money. It is becoming increasingly rare to find a small merchant who doesn't accept plastic, and the rise in usage by this sector, along with the overall booming credit industry, is good news for Global.
In addition to merchant services, Global operates a money transfer business, which primarily serves Latino immigrants in the U.S. and Europe who want to send money back to their home countries. Recently, Global formed a partnership with HSBC Holdings plc (NYSE: HBC) opening it to the Asia-Pacific market. Further, its financials are strong; it has no debt on its balance sheet, and almost $300 million in cash on hand.
Some analysts are concerned that increased regulations on the money transfer business, in part due to the Patriot Act, could seriously hurt Global, and it is something to keep an eye on.
Type of stock: A fast-growing company in the payment processing services sector, that is capitalizing on the small merchant business and pushing into new foreign markets through mergers and acquisitions.
Price target: At $39.85 right now, I think this is a good buy. With the growth of the credit card industry, Global's push into Asian markets, and the increase in Latin American immigrants sending money back home, I expect Global to continue growing at a strong clip. I could see GPN reach $55 by year's end. Hilary Kramer is a financial editor and money coach for AOL and an authority on investing. Visit her at www.hilarykramer.com.
Venerable money transfer firm Western Union Company (NYSE: WU) posted positive earnings overall on April 24, despite a 6% decline in volume for domestic transactions due primarily to the slowdown in the construction industry. Fewer jobs for Hispanics, who form the majority of construction workers, means fewer wire transfers of fewer dollars back home. Also, tighter documentation requirements for wiring money, coupled with increased immigration law enforcement caused a softening of domestic earnings by $20-$30 million. In order to counteract these effects, Western Union has reduced some fees for utilizing its online distribution network, www.westernunion.com.
Despite this, Western Union still posted solid revenue growth numbers. Revenue was up 8% to $1.1 billion. Diluted EPS was $0.25. First quarter 2007 operating income was $305 million. Net income was $193 million. During the quarter, Western Union was hit by higher than anticipated restructuring and integration costs as a result of spinning off its First Data subsidiary.
International consumer-to-consumer transactions now account for 60% of Western Union's total revenue. Within the international market, revenues from Chinese transactions are up 15% on transaction growth of 21%. India registered a 95% transaction growth rate from 1Q 2006. Western Union CEO Christina Gold believes Western Union has just scratched the surface of demand for wire transfers within India. In order to meet increasing international consumer-to-consumer demand, Western Union has signed more than 305,000 agent locations including supermarkets, newspaper kiosks and foreign banking networks worldwide.
In 1Q 2007, Western Union spent $113 million to buy back 5.2 million of its shares, with plans to spend an additional $867 million through 2008. Despite a tough domestic market, Western Union management forecasts FY 2007 to be $1.07-$1.11 on revenue growth of 10-11%. Western Union stock opened the year at $22.71, and closed recently at $22.16, having gone essentially nowhere. If you have the stock in your portfolio, I would hold on and wait for better times. If not, I wouldn't go out and buy it until we see how the US housing market will behave.
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.
a range of money transfer and bill payment services worldwide. Its consumer-to-consumer operations involve multi-currency and real-time processing systems for walk-in, online, and telephone money transfers. Its consumer-to-business operations enable payments to utilities, auto finance companies, mortgage servicers, financial service providers, and governmental agencies. The firm also offers money order products and advance payment services. Western Union does business through a network of more than 345,000 locations, in over 200 countries and territories.
Here are some highlights from this past week's 
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Street had been looking for 28 cents and $1.26 billion. D.A. Davidson subsequently upgraded the shares to "buy," noting improved business in Mexico and optimism over newer relationships with 
As credit card and debit card usage continues to soar, domestically and on a global scale, payment processing service companies stand to benefit. I am impressed by 
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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