Western Union Whacked 25% Lower on Gloomier '12 View

By FOXBusiness

Shares of Western Union (NYSE:WU) plummeted more than 25% Wednesday morning after the world’s largest payment transfer company took an axe to its full-year earnings targets amid rising competition.

The gloomier outlook from Western Union was issued Tuesday evening and triggered a slew of downgrades from major brokerages.

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The company said it earned $269.5 million, or 45 cents a share, last quarter, compared with a profit of $239.7 million, or 38 cents a share, a year earlier.

Excluding one-time items, the company earned 45 cents a share, up from 38 cents a share a year earlier and matching estimates from analysts. Revenue inched up 1% to $1.4 billion.

However, Western Union slashed its 2012 outlook, projecting non-GAAP EPS of $1.65 to $1.68, down from $1.73 to $1.77 previously. Even the high end of the new range would badly miss the Street’s view of $1.76.

“Business was challenging, as soft global economic conditions, compliance related changes, and competitive pressures in certain money transfer corridors impacted revenues,” CEO Hikmet Ersek said in a statement.

To combat competitive pressures and other issues, Western Union unveiled plans for a series of strategic moves, including increasing its pricing investment, continuing to invest in digital and cutting $30 million of annual cost savings by 2014.

Western Union’s outlook downgrade and new pricing strategy prompted a number of analysts to downgrade the stock, including Wells Fargo (NYSE:WFC) to “market perform” from “outperform.”

The new pricing strategy likely pushes any “earnings recovery to 2014 at the earliest, when potential market-share gains from lower prices should drive higher revenue,” analysts at Evercore (NYSE:EVR) wrote in a note, Dow Jones Newswires reported. Evercore downgraded Western Union to “underweight” from “overweight.”

On the positive side, Western Union upped its share repurchase plan to $750 million and raised its annual dividend by 25% to 50 cents a share.

Still, Wall Street hammered Western Union for the latest developments, driving its shares down 27.11% to $13.07 in recent trading on Wednesday. The stock had been trading roughly flat on the year before the selloff.