Piper Jaffray Raises Price Target On Western Union As Fundamentals Improve

Piper Jaffray reiterates its OW rating on Western Union WU and raises the price target from $23 to $26. Piper moves its price target onto its '12 estimate as it has increased confidence that money transfer industry fundamentals are improving. Piper believes improving fundamentals were a key reason why MGI was able to announce a favorable recapitalization plan yesterday. In addition, U.S. employment trends continue to show improvement.

Banco de Mexico transaction growth remained solidly positive in January, building on the strength seen during the 4Q. At 14.4x/12.7x our '11/'12 EPS estimates, Piper continue to believe WU's shares offer attractive risk/reward and that improving employment trends are likely to drive upside to our transaction, revenue, and EPS estimates.

WU has exceeded estimates both quarters subsequent to the promotion of Hikmet Ersek to CEO. Piper believes WU's revenue and EPS guidance for '11 is conservative. The '11 EPS estimate is $1.51, which falls near the high end of WU's guidance range and assumes 10% C2C transaction growth versus 9% growth in '10.

WU closed Tuesday at $21.71