Will Western Union (WU) Stock Disappoint Post Q3 Earnings?

Western Union Co. (NYSE:WU) is set to report third-quarter 2016 earnings results after market close on Nov 1.

Last quarter, this money transfer company surpassed the earnings estimate by 5%. The company, however, beat estimates in three out of the past four reported quarters by an average 1.8%.

Will Western Union be able to post a positive earnings surprise this quarter? Let's see what factors might have influenced the earnings report this time around.

Factors Likely to Influence Q3 Results

We expect third-quarter earnings to witness growth in the consumer money transfer business driven by strong performance from westernunion.com – a line of business in which the company has been consistently investing over the past many years.

Revenues from its international operations will likely present a mixed picture, with growth in some key European countries but continued challenges in many oil industry dependent markets.

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

Also, a negative currency will act as a dampener.

A number of agreements, deals and partnerships reached with numerous banks, post offices, telecom operators and retail stores recently widened the company’s network. This should drive top-line growth.

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

Share buybacks supported by the company’ strong balance sheet will help its 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 44 cents is the same as the Zacks Consensus Estimate. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Western Union has a Zacks Rank #4 (Sell). 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

Western Union is not the only stock looking up this earnings season. We also expect a likely earnings beat from these three companies:

Hercules Capital, Inc. (NYSE:HTGC) is scheduled to release third-quarter earnings results on Nov 3. The company has an Earnings ESP of +3.13% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

RenaissanceRe Holdings Ltd. (NYSE:RNR) with an Earnings ESP of +3.59% and a Zacks Rank #3 (Hold). The company is scheduled to release third-quarter earnings results on Nov 1.

American Financial Group Inc. (NYSE:AFG) has Earnings ESP of +2.61% and a Zacks Rank #3. The company is scheduled to release third-quarter earnings results on Nov 1.

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