Halister News

(Bloomberg) -- Western Union downgraded to sell from neutral after DOJ/FTC settlement given “permanent” margin impact from continued compliance costs, and “more aggressive” regulatory controls under Trump that will likely “scare customers” and hurt volumes, Compass Point’s John Williams writes in note.

• Sees “considerable downside” despite pullback yesterday (cuts PT to $17 from $20); settlement “changed the game,” and selling stock now is “prudent strategy” given margin/estimate uncertainty, long-term competitive woes
  • 4c-5c EPS drag in 2017 from compliance costs “would not be at all shocking”
• Sees settlement limiting capital allocation flexibility; now “far less likely” co. will do big acquisition
• Expects pricing compression given premium vs peers; notes WU hasn’t taken companywide pricing action in 2+ years
• WU has 4 buys, 15 holds, 9 sells, avg PT $20: Bloomberg data
• Short interest 12% of shares outstanding: Markit data
• NOTE: Jan. 19, WU Said to Keep Compliance Spending Unchanged
  • Western Union Settlement May Affect Share Buybacks: Jefferies
• NOTE: Jan. 4, Surge in Mexico Money Transfers Benefiting WU, MGI: JPMorgan
• NOTE: Dec. 1, Sell Western Union on Trump Immigration Stance, India Woes: Citi