MoneyGram Maintains its Industry Position, Risks Remain

On Dec 24, we updated our research report on the money transfer company MoneyGram International Inc. MGI.

MoneyGram serves more than 10 million customers worldwide in about 357,000 locations across 200 countries and territories. While the market for money transfer and bill payment services continues to be intensely competitive, MoneyGram remains the second largest global money transfer service company in the world based on total face value of remittances.

The company's diverse products and services are available through online and mobile channels. Its innovative self-service solutions, like moneygram.com, kiosks, mobile solutions and account deposit continue to attract new customers to its brand, while driving significant growth in money transfer revenue and transactions.

Increasing demand in transaction volumes both in domestic and international markets paved the way for growth over the past several quarters. The company has also aligned with several post offices and numerous national banks globally to provide convenient and affordable money transfer services.

The company has also undertaken cost saving initiatives which include closing facilities, headcount reductions, improving system processes, investing in automation, and offshoring. These initiatives are expected to reduce cost and accrue to its bottom line in the coming years.

Nevertheless, increased commission and operating expenses and compliance spending exert pressure on operating margins and cash flow at a time when operating revenues are already facing headwinds due to global instability. We expect the company to face stiff competition from the recently completed Xoom-Paypal merger.

Currently, MoneyGram carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same sector include General Finance Corporation GFN, Financial Engines, Inc. FNGN and Houlihan Lokey, Inc. HLI. While General Finance carries a Zacks Rank #1 (Strong Buy), the other two stocks carry a Zacks Rank #2 (Buy).

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