Shares of money-transfer specialist Western Union (NYSE: WU) were falling today after the company reported third-quarter results last night.
While the headline numbers were better than expected and its guidance improved modestly, investors still seemed to be disappointed that its turnaround isn't moving faster.
The stock closed down 9.7% on the news.
Western Union's turnaround is still turning
Revenue rose 1% in the third quarter, or 7% on an adjusted basis, reaching $1.1 billion, which compared to the analyst consensus of $1.03 billion.
Consumer-to-consumer revenue rose 4% in the quarter, its second straight quarter of gains in the category after several quarters of declines. The company credited that growth to the Middle East and Latin America. Branded digital revenue, meanwhile, also returned to growth, rising 3% in the quarter, and made up 21% of C2C revenues and 28% of C2C transactions. Branded transactions typically offer higher margins.
Adjusted operating margin in the period fell from 20.6% to 19.6% as the company invests in its turnaround strategy called "Evolve 2025."
On the bottom line, adjusted earnings per share rose from $0.42 to $0.43, beating the consensus at $0.38.
CEO Devin McGranahan said:
Third-quarter results exceeded our expectations and demonstrate a continued positive trajectory against our 'Evolve 2025' goals. This quarter's strong results were driven by continued revenue growth from the change in Iraqi monetary policy and by achieving positive global branded digital revenue growth a full quarter ahead of our expectations.
Is Western Union a buy?
Western Union also raised its guidance slightly. The company now sees adjusted revenue growth of flat to 1% for the full year, up from a previous range of -1% to 1%, and it raised its adjusted earnings per share guidance from $1.65-$1.75 to $1.68-$1.75.
While the results were solid, revenue slowed from the second quarter, and investors seem to fear that Western Union is falling behind faster-growing competitors like Remitly.
In its Evolve 2025 plan, Western Union called for mid-single-digit earnings-per-share growth in 2024 and 2025. If the company can deliver on that goal, the stock is likely to be a winner, as shares are cheap and offer a dividend yield above 8%.
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