Western Union (WU): still trending upwards

Back in June I wrote an article entitled Western Union (NYSE:WU) is gaining. The stock, which was trading around $24 at the time, has risen 4 points to $28 for a 15% gain. Not a bad gain for 2 months.

Let’s take a look at the recent news on the stock and see if it’s time to hold, sell, or double down.

On July 22nd, Western Union Co. announced that international growth helped drive its second-quarter profit up 13 percent, leading the money transfer services company to raise its full-year earnings outlook.

For the period ended June 30, the company reported net income of $231.5 million, or 31 cents per share, compared with $204.5 million, or 26 cents per share, a year ago. Excluding restructuring charges, the company earned 33 cents per share in the latest period.

Analysts surveyed by Thomson Financial expected adjusted profit of 31 cents per share on revenue of $1.33 billion.

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Revenue jumped 12 percent to $1.35 billion from $1.20 billion, helped by international growth and improving results in its U.S. and Mexico business. Results were also boosted by $38 million from converting euros into U.S. dollars, Western Union said.

The Americas region, which represents 34 percent of total revenue, reported modest revenue growth of 1 percent, due to the continued challenges in the U.S. economy, the company said. Domestic revenue declined 7 percent, while the Mexico business reported growth of 3 percent.

The Europe, Middle East, Africa and South Asia region, which makes up 44 percent of total revenue, posted growth of 23 percent. The Asia Pacific region, which represents the smallest portion of overall revenue, delivered 30 percent growth.

Total consumer-to-business revenue grew 3 percent to $179 million.

Western Union also raised its outlook for 2008 adjusted earnings per share to a range of $1.29 to $1.33, compared with Wall Street's average $1.28 per share estimate. The company previously forecast adjusted earnings per share of $1.25 to $1.29.

The increase is driven by the company's outlook for the 2008 tax rate, which continues to benefit from a higher proportion of foreign-derived profits that are taxed at lower rates than the U.S. rate, Western Union said.

Western Union also continues to expect revenue growth at the higher end of its projected 9 percent to 11 percent range.

Oppenheimer & Co. analyst Glenn Greene subsequently reiterated his "Outperform" rating and $29 target price on the stock.

"We think Western Union is more defensive than its peers, with a much greater percentage of its revenue coming from markets outside the U.S. and favorable secular trends," Greene wrote in a note to clients.

Wachovia Securities analyst Daniel R. Perlin raised his 2008 earnings estimate 1 cent to $1.34 per share.

"The company continues to post consistent results in an otherwise difficult market and appears to be focused on improving operating margin as revenue growth, especially internationally, remains robust," Perlin said.

Fellow Masters, in light of their recent earnings call, the stock has barely budged.  Have we found a winner here? I think so. That means continue to hold. For those of you who have a high risk threshold, buy the dips.