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Western Union (WU) Q1 Earnings: A Surprise in Store?

The Western Union Company WU is set to report first-quarter 2016 results on May 3, after the market closes. Last quarter, the company posted a positive earnings surprise of 2.44%. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter   

Western Union’s key business, Consumer-to-Consumer, is likely to have witnessed growth in the to-be-reported quarter owing to a surge in worldwide immigration. Also, the company anticipates revenue growth in this segment.

The company has likely witnessed increase in revenues from the international markets due to its superior brand value and the lower competition compared with the U.S. market.

Further, the company has likely witnessed good constant currency revenue growth from WesternUnion.com as well as the business solutions segment. In addition, the company is expected to have displayed steady performance from retail money transfer.

However, the company experienced challenging global economic growth and currency volatility. The impact of a stronger U.S. dollar is likely to weigh on the results of the to-be-reported quarter.

Further, high compliance and investment costs are anticipated to erode the company’s bottom line.

With respect to the surprise trend, the company delivered positive surprises in all of the last four quarters, with an average beat of 3.12%.

Earnings Whispers

Our proven model does not conclusively show that Western Union is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Western Union has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 38 cents.

Zacks Rank: Western Union holds a Zacks Rank #2 (Buy), which increases the predictive power of ESP. However, an ESP of 0.00% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.  

Stocks to Consider

Here are some companies from the finance sector that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

Fidelity National Information Services, Inc. FIS has an Earnings ESP of +2.70% and a Zacks Rank #3. The company is slated to report first-quarter earnings on May 3.

Federal Realty Investment Trust FRT has an Earnings ESP of +1.46% and a Zacks Rank #3. The company is slated to report first-quarter earnings on May 4.

Fidus Investment Corporation FDUS has an Earnings ESP of +2.44% and a Zacks Rank #1. The company is set to report first-quarter earnings on May 5.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
FED RLTY INV (FRT): Free Stock Analysis Report
 
FIDELITY NAT IN (FIS): Free Stock Analysis Report
 
WESTERN UNION (WU): Free Stock Analysis Report
 
FIDUS INVESTMNT (FDUS): Free Stock Analysis Report
 
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