Western Union Advances on Profit Growth

Posted 23 July 2008 @ 01:18 am EET     Print     Reprint     E-Mail     Comments

Western Union Co., the world's biggest money-transfer business, rose the most in 21 months in New York trading after second-quarter profit advanced 13 percent on overseas sales and the company raised its 2008 profit forecast.

Net income increased to $231.5 million, or 31 cents a share, from $204.5 million, or 26 cents a year earlier, the Englewood, Colorado-based company said today in a statement. Profit excluding restructuring costs was 33 cents a share, beating by 2 cents the average estimate of 22 analysts surveyed by Bloomberg.

Western Union climbed $2.16, or 8.6 percent, to $27.23 in New York trading at 4:15 p.m. after rising as much as 11 percent. Western Union is expanding outside North America as a weakening U.S. economy and tighter immigration controls have curtailed domestic money transfers and remittances to Mexico.

``Exceptional growth in international markets should leave little doubt that Western Union is a global company that can grow through U.S. economic woes,'' said Craig Maurer, analyst at New York-based Calyon Securities, who rates the company ``buy.''

Chief Executive Officer Christina Gold said today in the statement that sales in Mexico were improving and grew by 3 percent in the quarter.

Sales in the Americas grew 1 percent in the quarter and were ``impacted by the challenging U.S. economy,'' the company said. In the segment including Europe, Middle East, Africa and South Asia, revenue rose 23 percent. In the Asia Pacific region, sales rose 30 percent.

Lower Tax

The company increased its profit estimates for this year by 4 cents, to $1.22 to $1.26 a share from $1.18 to $1.22, and said earnings will probably be on the higher end of that range because of a lower expected tax rate.

Western Union said it benefited as more profits came from overseas, which are taxed at lower rates. The company's tax rate will be 26.5 percent this year, and will continue to move down over the next three to five years.

Revenue in the quarter rose 12 percent to $1.35 billion. The company had $23 million in expenses tied to closing offices in the quarter, and expects about $80 million in related costs this year.

Western Union is taking market share from other companies, Gold said today in an interview. The $400 billion sent in transfers globally this year is growing at 8 percent a year, she said, while the firm is growing more than 20 percent.

The company repurchased 17 million shares for $385 million during the quarter. There was $1.6 billion authorized for buybacks through 2009.

Global Remittances

Global remittances probably grew at the slowest pace in at least five years in 2007, the World Bank said in a November report. Money transfers to Mexico are expected to rise 1.4 percent after advancing at a 20 percent annual rate since 2002. India and China are the only countries that receive more remittances than Mexico, according to the report.

Western Union has avoided the mortgage investment-related woes of No. 2 ranked MoneyGram International Inc., whose shares plunged 96 percent in the past year, forcing it to raise as much as $1.5 billion from a group led by Thomas H. Lee Partners LP.

Western Union has advanced 21 percent in the past year of New York Stock Exchange composite trading through yesterday, compared with the 18 percent decline of the Standard & Poor's 500 Index.