Company Reports

Narrow-moat Western Union has been working to stabilize its business to improve growth, and showed good progress toward that goal in the first quarter. We think the company still has a ways to go to prove it can maintain this path, and our long-term expectations remain quite modest, given industry trends. However, we are encouraged by results in the quarter. We will maintain our $17 per share fair value estimate and continue to see shares as undervalued.

Western Union's primary macroeconomic exposure is to employment markets in the developed world, as the search for better economic opportunities is the fundamental driver for money transfers. While conditions have improved over time in the United States and Europe, a region that is about equally important for Western Union as the US, growth remains modest, with new entrants adding to the issues for legacy operators like Western Union. At this point, we don't see a long-term catalyst to meaningfully improve growth, with management focused on just stabilizing the business in the near term. Recent geopolitical events have been an additional headwind as the company made the decision to exit Russia, a significant money transfer market. We continue to believe Western Union has a moat based on its sizable scale advantage, but with a stagnant top line and limited long-term growth prospects, the amount of value the moat will create could be questioned.

Ignoring some transitory impacts, Western Union largely maintained its recent path in the fourth quarter. Excluding the divestiture of the business solutions segment, overall revenue declined 1% year over year. Overall, though, we think the business is showing signs that it is stabilizing and potentially setting the stage for a longer-term return to modest growth. We will maintain our $17 fair value estimate for the narrow-moat business and see shares as materially undervalued.

Western Union's primary macroeconomic exposure is to employment markets in the developed world, as the search for better economic opportunities is the fundamental driver for money transfers. While conditions have improved over time in the United States and Europe, a region that is about equally important for Western Union as the U.S., growth remains modest, with new entrants adding to the issues for legacy operators like Western Union. At this point, we don't see a long-term catalyst to meaningfully improve growth, with management focused on just stabilizing the business in the near term. Recent geopolitical events have been an additional headwind as the company made the decision to exit Russia, a significant money transfer market. We continue to believe Western Union has a moat based on its sizable scale advantage, but with a stagnant top line, the amount of value the moat will create over the long run could be questioned.

Overall, we see Western Union's third-quarter results as encouraging. While the company still has a way to go to get fully back on its feet, recent trends suggest that the company is headed in the right direction. We will maintain our $17 per share fair value estimate for the narrow-moat firm and see shares as undervalued right now.

While the company still faces some headwinds, Western Union appears to have experienced some improvement in the second quarter. We see the quarter as encouraging, but the results don’t materially alter our long-term view, and we will maintain our $17 fair value estimate for the narrow-moat company. We believe shares are meaningfully undervalued at the moment.

Western Union's primary macroeconomic exposure is to employment markets in the developed world, as the search for better economic opportunities is the fundamental driver for money transfers. While conditions have improved over time in the United States and Europe, a region that is about equally important for Western Union as the U.S., growth remains modest, with new entrants adding to the issues for legacy operators like Western Union. At this point, we don't see a long-term catalyst to meaningfully improve growth, with management focused on just stabilizing the business in the near term. Recent geopolitical events have been an additional headwind as the company made the decision to exit Russia, a significant money transfer market. We continue to believe Western Union has a moat based on its sizable scale advantage, but with a stagnant top line, the value of the moat going forward could be questioned.

Western Union is the largest player, by far, in an industry where size confers significant benefits. We see three potential advantages arising from the company’s size. First, we think Western Union has historically been able to maintain premium pricing in some corridors, resulting in an intangible asset advantage. Second, we think the company’s size has allowed it to pay relatively low commission rates to agents, as it could offer relatively high volumes as an offset, creating something of a network effect. And, finally, we think the scalable nature of the business creates a cost advantage for an industry leader like Western Union. We think the first two competitive advantages (premium pricing and lower agent commissions) have eroded to a point where they no longer meaningfully contribute to the company’s economic moat. However, we think Western Union’s scale advantage, which, in our view, has always been the primary moat driver for the firm remains in place. As result, we are lowering our moat rating for Western Union to narrow from wide. We are also lowering our fair value estimate to $17 per share from $18, mainly due to the change in the moat rating.

Western Union's primary macroeconomic exposure is to employment markets in the developed world, as the search for better economic opportunities is the fundamental driver for money transfers. While conditions have improved over time in the United States and Europe, a region that is about equally important for Western Union as the U.S., growth remains modest, with new entrants adding to the issues for legacy operators like Western Union. At this point, we don't see a long-term catalyst to meaningfully improve growth, with management focused on just stabilizing the business in the near term. Recent geopolitical events have been an additional headwind as the company made the decision to exit Russia, a significant money transfer market. We continue to believe Western Union has a wide moat based on its sizable scale advantage, but with a stagnant top line, the value of the moat going forward could be questioned.

Western Union's first-quarter results were not impressive in an absolute sense, but contained some signs that the company may be working through its recent issues and heading toward stabilization. Overall revenue was down 10% year over year on a reported basis, but only 1% excluding currency effects and divestitures, as an ongoing decline in the core money transfer business was partially offset by growth in other businesses. We will maintain our $18 fair value estimate and wide moat rating.

Western Union continues to experience revenue declines as it battles its way through difficult conditions, and the company is likely to remain under pressure in 2023 as management invests in an attempt to stabilize and grow the business. Overall, though, there were no major surprises in the wide-moat company's results or outlook, and we will maintain our $18 per share fair value estimate.

Western Union had already announced preliminary third-quarter results prior to its investor day, but the full release provided some additional details. Overall, however, we don’t see anything to materially alter our view of the company and will maintain our $18 fair value estimate and wide moat rating.

Western Union's primary macroeconomic exposure is to employment markets in the developed world, as the search for better economic opportunities is the fundamental driver for money transfers. While conditions have improved over time in the United States and Europe, a region that is about equally important for Western Union as the U.S., growth remains modest, with new entrants adding to the issues for legacy operators like Western Union. At this point, we don't see a catalyst to improve growth, and pandemic-related headwinds appear to be lingering. Recent geopolitical events are an additional headwind as the company made the decision to exit Russia, a significant money transfer market. We continue to believe Western Union has a wide moat based on its sizable scale advantage, but with a stagnant top line, the value of the moat going forward could be questioned.

As part of its investors day, wide-moat-rated Western Union announced guidance through 2025 that came in below our expectations and implies a somewhat rougher road over the next several years. While we had expected a revenue decline in 2023, the level of the decline inferred by the company's guidance is a bit steeper than we had anticipated, due in part to the strong dollar. Additionally, the ramp up to better growth is a little slower than we had expected, and management's margin guidance over the next few years suggests modest pressure on this front. After factoring these issues into our projections, we expect to lower our fair value estimate to $18 per share from $20.

Western Union announced some limited preliminary results for the third quarter ahead of its planned investor day. The figures released are roughly in line with our expectations, and the company reaffirmed its 2022 outlook. We will maintain our $20 fair value estimate and wide moat rating.

Western Union's primary macroeconomic exposure is to employment markets in the developed world, as the search for better economic opportunities is the fundamental driver for money transfers. While conditions have improved over time in the United States and Europe, a region that is about equally important for Western Union as the U.S., growth remains modest, with new entrants adding to the issues for legacy operators like Western Union. At this point, we don't see a catalyst to improve growth, and pandemic-related headwinds appear to be lingering. Recent geopolitical events are an additional headwind. We continue to believe Western Union has a wide moat based on its sizable scale advantage, but with a stagnant top line, the value of the moat going forward could be questioned.

Western Union's second-quarter results showed the company struggling with a difficult end market and its decision to exit Russia. Further, the company announced that two large retail agents in Europe will downscale their relationships over the next year, which will negatively affect revenue, and digital revenue also appears to be facing some headwinds. On the bright side, Western Union has improved margins. After reassessing our projections, we expect to reduce our $22 fair value estimate for the wide-moat company by about 10%.

Western Union's primary macroeconomic exposure is to employment markets in the developed world, as the search for better economic opportunities is the fundamental driver for money transfers. While conditions have improved over time in the United States and Europe, a region that is about equally important for Western Union as the U.S., growth remains modest, with new entrants adding to the issues for legacy operators like Western Union. At this point, we don't see a catalyst to improve growth, and pandemic-related headwinds appear to be lingering. Recent geopolitical events could be an additional headwind. We continue to believe Western Union has a wide moat based on its sizable scale advantage, but with a stagnant top line, the value of the moat going forward could be questioned.

Western Union's primary macroeconomic exposure is to employment markets in the developed world, as the search for better economic opportunities is the fundamental driver for money transfers. While conditions have improved over time in the United States and Europe, a region that is about equally important for Western Union as the U.S., growth remains modest, with new entrants adding to the issues for legacy operators like Western Union. At this point, we don't see a catalyst to improve the situation. Pandemic-related headwinds appear to be lingering, and the decision to exit Russia will add pressure. We continue to believe Western Union has a wide moat based on its sizable scale advantage, but with a stagnant top line, the value of the moat over the next few years could be questioned.

Western Union’s revenue remained under pressure in the first quarter, as macroeconomic conditions are putting some stress on the business. After reassessing our projections in light of current headwinds, we expect to lower our fair value estimate to $22 from $23, but will maintain our wide moat rating.