Earnings Preview: Western Union

Western Union (WU) is expected to report Q2 earnings Tuesday before market open, with a conference call scheduled for 8:30 am ET.

Guidance

The consensus estimate is 31c for EPS and $1.33B for revenue, according to First Call. In terms of guidance, on June 20, Western Union raised its long-term EPS growth objective to 15% to 18%, up from 12% to 14%, and reaffirmed its long-term revenue growth objective of 10% to 12%, excluding acquisitions.

Analyst Views

Oppenheimer expects Western Union to deliver another strong, in-line quarter, affirm its 2008 outlook, and provide further commentary on 2009. The firm thinks the key to Western Union's performance remains International growth and the associated margin ramp which could prove better than Oppenheimer's expectations if Mexico turns around. Oppenheimer remains highly attracted to the shares, and believes its earnings estimates and multiple expansion projections could prove conservative. Opco thinks there is a slight chance that Western Union could raise its FY08 outlook above its $1.25 to $1.29 range. However, for this to occur, Western Union's Domestic and Mexico businesses would likely have to have shown clear signs of stabilization, which it suspects is too early to expect.

Key issues for conference call: Forward guidance; commentary on the company's appeal of a Arizona court ruling that allows the state's attorney general to seize money transfers sent from other U.S. states to Mexico; and an update on the company's increased share repurchase program of an additional $1B announced within the quarter.