After looking at The Western Union Company’s (NYSE:WU) latest earnings update (30 September 2017), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. View our latest analysis for Western Union

Was WU’s recent earnings decline indicative of a tough track record?

I like to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This enables me to analyze many different companies in a uniform manner using the latest information. Western Union’s most recent twelve-month earnings is $208.8M, which, in comparison to the previous year’s level, has declined by a non-trivial -74.55%. Since these values may be relatively nearsighted, I’ve calculated an annualized five-year value for WU’s earnings, which stands at $825.8M. This doesn’t look much better, since earnings seem to have steadily been falling over time.

Why is this? Let’s examine what’s occurring with margins and if the whole industry is feeling the heat. Revenue growth in the past couple of years, has been positive, nevertheless earnings growth has been declining. This implies that Western Union has been increasing expenses, which is harming margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the US it industry has been growing, albeit, at a subdued single-digit rate of 2.96% over the prior year, and 9.97% over the previous few years. This shows that any recent headwind the industry is experiencing, it’s hitting Western Union harder than its peers.

What does this mean?

Western Union’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. In some cases, companies that experience an extended period of decline in earnings are undergoing some sort of reinvestment phase . However, if the entire industry is struggling to grow over time, it may be a sign of a structural shift, which makes Western Union and its peers a higher risk investment. You should continue to research Western Union to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for WU’s future growth? Take a look at our free research report of analyst consensus for WU’s outlook.

2. Financial Health: Is WU’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.

3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.