Why Western Union Was Downgraded After Positive Earnings

In a report published this morning, analyst Bryan Keane of Deutsche Bank, downgraded The Western Union Company WU from Buy to Hold.

Despite Western Union beating the EPS estimate of Deutsche Bank (estimated EPS $0.33 vs adjusted EPS $0.42) Keane has uncertainty regarding the stock.

Keane sees caution in the form of slowing transaction growth citing, “The expansion of compliance costs as well as the impact of lower oil prices on Middle-East outbound remittances could weigh on both transaction and principal growth. Additionally, MGI pricing changes in the US market put 4% of WU’s revenues at risk.”

Along with transaction growth decelerating, Keane sees an uncertain margin and revenue outlook as a reason for his downgrade.

Keane also highlights possible downside risks, such as new regulation costs, as well as new pricing actions, as a reason why margins may diminish in the future despite cost-cutting initiatives.

Guidance released in the report projected FY15 EPS to be in the range of $1.58 to $1.65.

As of Wednesday afternoon, Western Union was trading down 1.2 percent at $17.99.