Citi Reiterates Buy On Western Union Following Management Meetings

Citi hosted meetings with global money transfer leaders Western Union WU and MoneyGragm MGI in Denver this past week. Citi's takeaways were generally positive as it relates to WU and the cyclical recovery of the industry in general. WU could outperform its initial 2011 guidance. WU valuation remains attractive even after the recent rally.

A lot of investor interest centered on emerging businesses such as prepaid and mobile. It is still early days for these markets and we continue to view them as longer-term opportunities for WU. On the B2B business, look for mid-teens growth driven by an improved distribution and new target geographies. Incremental commentary on the lagging C2B business was interesting as well, Citi looks for stability and a potential restructuring at WU, which could help C2B margins.

Citi remains very comfortable with our forecasted margin improvement for WU in 2011 based on commentary on restructuring actions, pricing trends and lapping of dilution of Custom House. Incremental margins should also be robust as revenue growth accelerates on the fixed cost base.

Citi has a $25 PT and Buy rating on WU

WU closed Friday at $21.88