Buy Western Union At 3-Year Lows

Western Union (WU) reported an earnings per share figure that met analysts' expectations for earnings, but it missed its revenue estimates. The company disclosed its third quarter performance on October 30, 2012. Against an expectation of $0.45 per share, the company posted earnings per share of $0.45 per share. This was despite a revenue figure of $1.4 billion, which remained around 7% behind expectations of $1.5 billion. WU also reduced its guidance that resulted in share price being cut to one third. We think this is a very good entry point for long term investors who want to benefit from the expanding network for consumer money transfer.

Going forward, we believe the company will benefit from the expansion in its network of consumer money transfer, the addition of new online capabilities, its expansion through inclusion of new geographical areas into its network, and the focus on its Business to Business segment. The company has disclosed elaborate strategic plans to make its market share grow, by improving customer value proposition, inducing growth in its digital (online) business, and implementing cost saving and productivity enhancing initiatives. These initiatives may have the impact of creating downward pressure on the company's bottom line in the near future, however, Western Union will benefit from them in the long term. We also believe the worst has been priced in, as the stock plunges to its 3-year low. This dip provides a perfect buying opportunity for investors. Therefore, we recommend long term investors to buy the stock.

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