Can Western Union (WU) Maintain its Earnings Trend in Q4?

Western Union Co. (WU) is set to report fourth-quarter 2014 results after the market closes on Feb 10.

In the last quarter, this money transfer company delivered a positive earnings surprise of 12.8%. The average beat for the trailing four quarters is 4.6%.

Will Western Union be able to keep its earnings streak alive this quarter? Let's see what factors might have influenced the earnings report this time around.

Factors Likely to Influence Q4 Results

We believe the quarter’s results will be affected by pricing investments as well as compliance cost which is expected to rise.

Moreover, results might also reflect the effect of compressed remittance transactions and volumes which are likely to remain under pressure until global migrant employment improves.

Nevertheless, Western Union’s strong international business will lead to earnings accretion. More than 80% of its agents are based internationally. Since the company faces less competition outside the U.S., the international segment promises growth.

Moreover, Western Union’s attempt to develop its technology offerings like prepaid, westernunion.com and mobile money transfer will generate revenues.

Earnings Whispers

Our proven model does not conclusively show that Western Union is likely to beat 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 -2.94%. This is because both the Most Accurate estimate is 33 cents and the Zacks Consensus Estimate is pegged higher at 34 cents.

Zacks Rank: Western Union has a Zacks Rank #3 (Hold). Though this increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.

Stocks to Consider

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

CYS Investments, Inc. (CYS) has an Earnings ESP of +3.1% and a Zacks Rank #1.

Arch Capital Group Ltd. (ACGL) has an Earnings ESP of +0.95% and a Zacks Rank #1.

Radian Group Inc. (RDN) has an Earnings ESP of +13.9% and a Zacks Rank #2 (Buy).