Wells Fargo Downgrades Western Union Co. (WU) to Market Perform after Q3, Competition Weighing
Wells Fargo downgraded Western Union Co. (NYSE: WU) from Outperform to Market Perform with a price target of $18-$20 from $26-$28 following Q3 results, lower outlook.
"We are lowering our rating, estimates and valuation range on WU as the impact of competition is weighing on results to a greater degree than we had envisioned, prompting the company to embark on a strategy to reduce prices in key corridors, weighing on our revenue outlook while also prompting investment in product, marketing and consumer experience," the analyst comments.
The continued, "while we still believe that there is a solid cash-flow generating business (upped share repurchase and dividend) we believe that shares are range bound due to lack of visible earnings growth prospects to drive shares higher while the dividend yield (pro-forma of 2.7% at current price) will limit downside risk. While shares may continue to look "inexpensive" we believe the company has to not only rebuild earnings momentum but also credibility both of which will likely take some time prompting us to lower our rating to Market Perform from Outperform and advise investors to look at other names in our universe where 12-month returns are
likely to be more visible/attractive."
Wells cut 2012 estimate to/from $1.72/$1.76 and 2013 estimate goes to/from $1.53/$1.94.
For an analyst ratings summary and ratings history on Western Union Co. click here. For more ratings news on Western Union Co. click here.
Shares of Western Union Co. closed at $17.93 yesterday, with a 52 week range of $15.79-$19.82.
"We are lowering our rating, estimates and valuation range on WU as the impact of competition is weighing on results to a greater degree than we had envisioned, prompting the company to embark on a strategy to reduce prices in key corridors, weighing on our revenue outlook while also prompting investment in product, marketing and consumer experience," the analyst comments.
The continued, "while we still believe that there is a solid cash-flow generating business (upped share repurchase and dividend) we believe that shares are range bound due to lack of visible earnings growth prospects to drive shares higher while the dividend yield (pro-forma of 2.7% at current price) will limit downside risk. While shares may continue to look "inexpensive" we believe the company has to not only rebuild earnings momentum but also credibility both of which will likely take some time prompting us to lower our rating to Market Perform from Outperform and advise investors to look at other names in our universe where 12-month returns are
likely to be more visible/attractive."
Wells cut 2012 estimate to/from $1.72/$1.76 and 2013 estimate goes to/from $1.53/$1.94.
For an analyst ratings summary and ratings history on Western Union Co. click here. For more ratings news on Western Union Co. click here.
Shares of Western Union Co. closed at $17.93 yesterday, with a 52 week range of $15.79-$19.82.