Western Union Hits 52-Week High On Solid Q2, Recent Deals

On Aug 24, 2016, the stock of money transfer company, Western Union Co. WU hit a 52-week high of $21.62. The advancement in the stock is believed to have been driven by a number of factors including better-than-expected second-quarter earnings, a dividend hike, implementation of an anti-money-laundering program, enhancement of digital capabilities, and a number of partnerships and alliances sealed recently.

Investors drew comfort from Western Union’s second-quarter earnings of 42 cents that surpassed the Zacks Consensus Estimate by 5% and increased 17% year on year mainly due to strong growth in its digital and U.S. money transfer businesses. Moreover, the company managed both top-line growth and expense control as evident from lower operating expenses.

The stock was also favored by investors courtesy of a 6.7% dividend hike in the second quarter.

WESTERN UNION Price and Consensus

WESTERN UNION Price and Consensus | WESTERN UNION Quote

The price appreciation is also attributable to the company’s successful completion of Southwest Border Monitor primary recommendations by implementing an effective anti-money-laundering program. This is a significant milestone that has helped the company to emerge as a frontrunner in controlling illegal transfer of funds and protecting the integrity of its network. This move has cemented investors’ confidence in the company.

Investors who were worried about the company’s lack of presence in the fast-growing digital payments arena are now drawing solace from its consistent efforts to expand this platform. Revenues from digital money transfer have been growing since the past many quarters. Last month, the company announced that it will enhance its capabilities in the digital trading platform WU EDGE and reach out to seven new markets.

The stock also got a boost from a number of agreements that it reached recently. These include the renewal of a 20-year tie-up with Rite Aid Corporation; an agreement with Walmart (NYSE:WMT) de Mexico y Centroamérica to offer international money transfer services under the Western Union, Vigo and Orlandi Valuta brands throughout the region; and an agreement with DriveWealth to provide individual investors with greater acccess to the U.S. stock market.

Western Union carries a Zacks Rank #3 (Hold). Some better-ranked stock in this space are JetPay Corporation JTPY, WEX Inc. (NYSE:WEX) and SLM Corporation SLM. Each of these stocks carries a Zacks Rank #2 (Buy).