UPDATE: Compass Point Downgrades Western Union Ahead of 2Q'13 Earnings

In a report published Thursday, Compass Point analyst Douglas Greiner downgraded Western Union WU from Buy to Neutral, but reiterated the $18.00 price target.

In the report, Compass Point noted, “In front of 2Q'13 earnings we downgrade our rating from Buy to Neutral. WU is scheduled to report on Tuesday before market open. We upgraded the shares at $14.34 on 2/13/13 setting an $18 price target. As of yesterday's close the shares have appreciated 22% excluding dividends. Our buy rating was based on looking past this year's price cuts and focusing on 'normalized' earnings. A recovery scenario now looks priced. But progress has not yet begun to meaningfully develop. For instance, C2C transaction y/y growth trends ran -2% in 1Q'13 and -1% in 4Q'13. To move our valuation methodology higher, we need to see this trend substantially improve. While we expect a favorable outcome, the outlook looks volatile and lengthy. Accordingly, we find today's risk / reward profile unfavorable. We note that short interest has increased from 19.2 million as of February 15th to 40.9 million as of July 15th, which equals a move from 3.3% to 6.9% of shares outstanding. Our $18 price target equals 10.9x our estimate of 2014 Adjusted EPS and 10.3x our estimate of 2015 Adjusted EPS. Since 2008 we measure the 'normalized' forward multiple at around 11.0x.”

Western Union closed on Wednesday at $17.44.