Credit Suisse Comments On Western Union's Solid Quarter; Raises Estimates

Western Union WU reported its 4Q10 results with revenues of $1.36B, up 3.3% Y/Y and EPS of $0.38, well ahead of Credit Suisse's $1.32B revenue and $0.34 EPS ests. WU guided to 3%-4% CC revenue and $1.47 - $1.52 in EPS for FY11, in line with Credit Suisse's preview expectations. Due to WU's solid transaction growth including a turnaround in the Gulf and in Europe, accelerated new initiatives, and improved margins, Credit Suisse is raising its FY11 and FY12 EPS by $0.03 each, to $1.50 and $1.74, respectively. Strength in the UK, Germany, France, and Russia and a turnaround in the Gulf states supported EMEASA constant-currency revenue growth. International transactions showed an uptick from +7% Y/Y in 3Q10 to +8% Y/Y in 4Q10, and the cross-border principal increased from +6% Y/Y in 3Q to +7% Y/Y in 4Q. WU expects its solid transaction and revenue growth, bolstered by improving remittance volume, to continue into 2011 and beyond. Credit Suisse continues to believe that WU's multiple will expand as the recovery in revenue and operating margins takes place in 2011 and 2012. At the $25 TP, WU would trade at 17x CY11 EPS and below its pre-recession averages. Credit Suisse has an Outperform rating on WU