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Western Union Falls on Disappointing 2012 Outlook

Wednesday, 08 Feb 2012 12:08 PM


Shares of Money transfer company Western Union Co. fell more than 8 percent Wednesday after the company said it expects 2012 profits and income to be lower than analysts' expectations.

THE SPARK
Late Tuesday Western Union reported its fourth-quarter and full-year 2011 earnings. The results weren't all bad. The company said its fourth-quarter profits doubled from the same period last year. But it was the outlook for 2012 that scared off investors.

Western Union expects adjusted net income of $1.70 to $1.75 per share in 2012, excluding one-time items like acquisition costs.
That's well below analysts' expectations for $1.81 per share, according to FactSet.

THE BIG PICTURE
Western Union helps consumers around the world wire money to one another. In a way, it acts as a kind of banking system for many people in developing countries who might not have traditional bank accounts.
The company may be vulnerable to economic downturns, and its wire transfer business can slow down just like a bank's business when the economy sinks.

Western Union also said its 2012 results will be hurt as it incurs costs to integrate Global Business Payments, including amortization for Western Union Business Solutions, which includes the new Travelex Global unit, of about $60 million in 2012.

THE ANALYSIS
William Blair & Company analyst Robert Napoli cut his outlook for Western Union's 2012 performance after the company's earnings report.

In a note to clients Tuesday, Napoli said he was lowering his 2012 earnings forecast to $1.73 per share from $1.83 per share. He expects revenue in 2012 to grow 5 percent, down from 8 percent. He also cut his 2013 forecast to $1.93 per share from $2.05 per share and reduced his revenue growth estimate to 6 percent from 7 percent.

SHARE ACTION
The stock fell $1.65, or 8.4 percent, to $18.05 in morning trading Wednesday. It hit a 52-week high of $22.03 per share last March, before the European debt crisis and recession fears began to weigh on stocks. The stock was down to a low of $15.11 by October.

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