MoneyGram Beats on Earnings in Q2, 2015 Guidance Intact

Shares of MoneyGram International Inc. MGI rose 13.3% in the last trading session to close at $10.2. The rise was prompted by the company's second-quarter 2015 financial report wherein adjusted earnings per share EPS of 12 cents surpassed the Zacks Consensus Estimate by a penny.
 

MoneyGram's total revenue for the quarter came at $358.8 million, down 4% from the year-ago period. While fee and other revenues decreased 3.5% year over year to $356 million, investment revenues came in at $2.8 million, down 28.6%.

Total operating expenses declined 6.6% year over year to $374.5 million. Total commission expenses declined 5.1% year over year to $163.4 million.

Quarterly Segment Results

In MoneyGram's Global Funds Transfer segment, revenues fell 3.4% year over year to $340.7 million. Money transfer fee and other revenues declined 3.7% year over year to $316.5 million.

U.S. outbound transaction increased 13% year over year, reflecting double-digit growth for the 15th consecutive quarter. The improvement was driven by increased sends to Latin America and Africa.

Non-U.S. send transactions grew 16% from the year-ago quarter led by sends from the Middle East, Africa and the UK. U.S.-to-U.S. transactions declined 22%, an improvement from a decline of 37% in the first quarter.

Self-service money transfer revenues surged 58% from the prior-year quarter, representing 12% of money transfer revenues. Moreover, MoneyGram's online money transfer transactions grew 19%, while revenues were up 10% from the prior-year quarter, driven by an increase in the number of customers.

As a result of lower revenues and higher expenses, adjusted operating margin deteriorated to 6.2% from 10.4% in the prior-year quarter.

In the Financial Paper Products segment, MoneyGram's total revenue fell 8.3% year over year to $18.1 million, reflecting lower fee, other and investment  revenues within both money order and official check sub-segments. Adjusted operating margin deteriorated to 30.9% from 38.8% in the year-ago quarter.

Liquidity

As of Jun 30, 2015, MoneyGram had cash and cash equivalents of $128.6 million (down from $250.6 million at year-end 2014) and total assets of $4.46 billion (down from $4.64 billion at the year-end 2014). The company exited the second quarter with $958.5 million in outstanding debt (down from $963.5 million at the end of 2014).

Due to the repositioning of U.S.-to-U.S. business, investments in the global transformation program and signing bonus payments, the company reported negative adjusted free cash flow of $7.4 million in the second quarter.

Outlook

MoneyGram kept its 2015 guidance intact. It projects flat 2015 revenues on a constant currency basis, while adjusted EBITDA is anticipated to fall 8–12%. For the fourth quarter, the company projects revenue and adjusted EBITDA to witness year-over-year, double-digit constant currency growth.

Zacks Rank

Currently, MoneyGram carries a Zacks Rank #3 (Hold).

Performance of Other Players

The bottom line at the company's peers Western Union Co. WU and Euronet Worldwide, Inc. EEFT beat the respective estimates by 5.13% and 1.59%. However, but Xoom Corp. XOOM missed our bottom linenexpectation and reported loss of 2 cents per share.  
 

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