Will Western Union (WU) Q2 Earnings Snap Surprise Trend?

Western Union Co. (NYSE:WU) is set to report second-quarter 2016 earnings results after market close on Aug 3.

Last quarter, this money transfer company missed the earnings estimate by 2.63%. The company, however, beat estimates in three out of the past four reported quarters, with the average beat being 1.8%

Will Western Union be able to keep its streak of positive earnings surprise alive this quarter?

Let's see what factors might have influenced the earnings report this time around.

Factors Likely to Influence Q2 Results

A strong dollar will continue to affect second-quarter revenues of Western Union which has a broad international business exposure.

Revenues will also remain depressed due to continued weakness in Russia. Low oil prices will be affecting revenues from Middle East and Africa.

Bottom line will also see a drag from technology spending and investment that has increased from last year, as the company continues to invest in enhancements to its platforms, digital capabilities, settlement systems and data center transformation.

Higher technology expense will also negatively impact the C2C segment operating margin.

Nevertheless, the consumer-to-business and consumer-to-consumer segments will see higher operating margin from cost saving initiatives.

We also expect the company’s online business, in which it is investing heavily, to reap results. A margin upside is also likely from the restructuring efforts taken previously.

Share buybacks supported by the company’ strong balance sheet will help the bottom line. But will these be enough for an earnings beat?

Earnings Whispers

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

Zacks ESP: Western Union’s Earnings ESP is 0.00%. This is because the Most Accurate estimate of 40 cents is the same as the Zacks Consensus Estimate.

Zacks Rank: Western Union has a Zacks Rank #4 (Sell). As it is the company has a 0.00% Earnings ESP, on top of that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when it is seeing negative estimate revisions.

Stocks to Consider

Here are some other financial companies which you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Prudential Financial, Inc. (NYSE:PRU) has an Earnings ESP of +0.40% and carries a Zacks Rank #3. The company is slated to report second-quarter earnings results on Aug 3.

Manulife Financial Corporation (NYSE:ALL) has an Earnings ESP of +2.94% and carries a Zacks Rank #3. The company is expected to report second-quarter earnings results on Aug 4.

Sun Life Financial Inc. (TO:SLF) has an Earnings ESP of +1.47% and carries a Zacks Rank #2. The company is expected to report second-quarter earnings results on Aug 10.

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 >>