Fortifying its money transfer network in the UK, MoneyGram International Inc. MGI inked a strategic alliances with two currency exchange companies – Dawson & Sanderson Ltd. and ChangeGroup. The association will add 40 locations to the MoneyGram’s UK network.
Dawson & Sanderson, also functional in the travel business, will add MoneyGram’s money transfer services to its 20 branches spread across Northern England. On the other hand, ChangeGroup aims to expand its services in the UK as well through this alliance.
MoneyGram will offer its basic money transfer services to customers of both the companies. This will enable MoneyGram to transfer money easily from the UK to countries across the globe, and thus progressively cover a better share of the market.
The idea is to add value to the business by giving MoneyGram customers access to convenient and varied money transfer options. Currently, MoneyGram offers worldwide money transfer services in more than 200 countries through a global network of 350,000 agent locations.
We expect such alliances to boost MoneyGram’s global market position, and accelerate the company’s organic growth by boosting its money transfer business. Expansion in the UK and other international markets is also crucial for MoneyGram to offset the loss of revenues due to cannibalization from Walmart’s while-label product and its low price revisions in U.S.-to-U.S. money transfer transaction fees in 2014.
Earnings Review
Meanwhile, MoneyGram reported fourth-quarter 2014 operating earnings per share of 13 cents, which lagged the Zacks Consensus Estimate of 19 cents by 31.6%, resulting in a trailing four-quarter miss of 21.3%. Earnings also witnessed a drastic fall from the year-ago quarter figure of 35 cents.
Anticipation of a flat top line and EBITDA decline of 8–12% in 2015 also cast a bleak outlook, going forward. Accordingly, the Zacks Consensus Estimate for 2015 and 2016 tanked 7.1% and 4.3%, respectively, in the last 7 days itself. Hence, MoneyGram currently carries a Zacks Rank #4 (Sell).
Key Picks in the Sector
Better-ranked stocks in the financial services sector include General Finance Corp. GFN, Synchrony Financial SYF and Apollo Residential Mortgage Inc. AMTG. All these stocks carry a Zacks Rank #2 (Buy).
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