MoneyGram a Penny Ahead - Analyst Blog
10 11월 2012 - 12:18AM
Zacks
MoneyGram International Inc. (MGI) reported
third-quarter 2012 earnings per share of 28 cents, a penny higher
than the Zacks Consensus Estimate. However, the reported earnings
soared from year-ago quarter’s earnings of 3 cents a share.
Operating net income in the reported quarter excluded negative
impacts of certain accruals and legal expenses of $72.2 million or
$1.00 per share, restructuring and reorganization costs of $3.9
million or 3 cents per share and stock-based compensation of $2.4
million or 2 cents a share.
Including these expenses, reported net loss available to common
shareholders surged to $54.8 million or 77 cents per share against
a net income of $15.8 million or 22 cents per share in the year-ago
quarter.
Higher money transfer transaction volumes and higher fee and
other revenue drove the top line, while lower interest expenses
helped the bottom line. However, lower investment income along with
higher operating, commissions and tax expenses deteriorated the
margins and cash flow.
Total operating expenses escalated 29.9% year over year to
$365.9 million, whereas total commission expense climbed 8.1% year
over year to $152.5 million. Subsequently, operating loss widened
to $27.4 million from an income of $40.3 million in the year-ago
quarter. However, interest expense decreased by 20.3% from the
prior year to $17.7 million as a result of continued delevering
activities and the refinancing initiated in May 2011.
MoneyGram’s total revenue for the quarter was $338.6 million, up
5.2% from the year-ago period but lagged the Zacks Consensus
Estimate of $343 million. While fee and other revenue increased
5.5% year over year to $335.6 million, investment revenue plunged
25.6% to $2.9 million. MoneyGram has been gaining traction with the
raised momentum in self-service and new channel revenue that jumped
40% during the reported quarter and represented 5% of money
transfer revenue.
Segment Results
In the Global Funds Transfer segment,
MoneyGram’s revenue climbed 6.4% year over year to $317.9 million.
Money transfer transaction volume increased 13%, while money
transfer fee and other revenue grew 8%year over year to $291.3
million and 11% on a constant currency basis, showcasing
double-digit growth for the sixth consecutive quarter.
Further, global agent locations increased 15% over the
prior-year quarter to 293,000, primarily driven by growth in India,
Africa and Mexico. Bill payment transaction volume dipped 4% year
over year, whereas, fee and other revenue declined 7% to $26.4
million from the prior-year quarter.
However, excluding the effect of divestiture in the fourth
quarter of 2011, bill payment transaction volumes improved by 5%
year over year, while fee and other revenue decreased
marginally.
As a result, operating margin deteriorated to 12.4% from 13.1%
in the year-ago quarter, while adjusted operating margin also
dipped to 14.2% from 16.4% in the year-ago quarter.
Total money transfer transactions originating outside the U.S.
escalated 18% from the prior-year quarter. Transaction volume to
Mexico increased 19% year over year, significantly improving for
the eleventh-consecutive quarter. Additionally, MoneyGram’s
transactions originating in the U.S. increased 9% year over year,
while U.S. outbound transaction growth increased 13% over the
prior-year period.
In the Financial Paper Products
segment, MoneyGram’s total revenue declined 9.8% year over year to
$20.3 million, reflecting reduced investment, money order and
official check revenues. Conversely, operating margin improved to
37.3% from 24.6% in the year-ago quarter, although commission
expenses remained high. As well, adjusted operating margin
escalated to 39.7% from 30.5% in the year-ago quarter.
Liquidity
As of September 30, 2012, MoneyGram had cash and cash
equivalents of $2.54 billion (down from $2.57 billion at 2011-end),
net receivables of $1.33 billion (up from $1.22 billion) and
available-for-sale investments of $79.9 million (down from $102.8
million).
The company ended the reported quarter with $810.1 million of
outstanding debt (marginally down from $814.6 million at 2011-end),
and assets in excess of payment service obligations of $266.1
million (up from $211.7 million). Free cash flow slipped to $24.6
million from $36.4 million in the year-ago quarter, primarily
driven by higher signing bonuses and capital expenditures that were
partly offset by lower interest payments.
Guidance
Management reiterated its 2012 guidance and expects total
revenue to grow 7–9%, while adjusted EBITDA growth is forecasted in
the band of 9–11%. Including the impact of declining euro against
the U.S. dollar, reported EBITDA is projected within 7–9%. This is
consistent with the company’s long-term goals. Total marketing
spend is anticipated to be about 4.5% of total revenue.
Peer Take
Last week, MoneyGram’s peer Western Union Co.
(WU) reported third quarter operating earnings of 45 cents per
share, in line with the Zacks Consensus Estimate. Earnings compared
favorably with 40 cents reported in the year-ago quarter. While
consumer-to-consumer revenue segment declined due to weak economic
conditions in Southern Europe and the US, all other business
segment witnessed noticeable growth year-over-year.
MoneyGram carries a Zacks #3 Rank, which translates into a Hold
rating over the short term. Additionally, we maintain a Neutral
recommendation over the long term.
MONEYGRAM INTL (MGI): Free Stock Analysis Report
WESTERN UNION (WU): Free Stock Analysis Report
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Zacks Investment Research
Western Union (NYSE:WU)
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