StockCall Analysis on Western Union and MoneyGram: Getting Ready for Frank-Dodd Legislation

Jan 30, 2013, 08:00 ET from

LONDON, January 30, 2013 /PRNewswire/ --

Business Services industries had a tough year in 2012. The sector saw intense competition resulting in costly price wars. Major Service providers like The Western Union Co. (NYSE: WU) and MoneyGram International Inc. (NYSE: MGI) resorted to deep price cuts, putting pressure on their margins. StockCall analysts have completed in-depth technical analysis on these two companies. The free reports can be downloaded upon registration at

The industry is also expected to see big changes in February this year as the Dodd-Frank legislation is implemented. The new regulations will increase the disclosure burden on the companies as these will be required to make wider disclosures about foreign exchange rates and fees.

MoneyGram Expands Internationally

MoneyGram International Inc. is augmenting its business operations internationally. It now has a 20,000 agent strong presence in Africa. The company operates in Africa through its collaborator, Express Exchange. MoneyGram International suffered net loss of $54.8 million in the third quarter of the year, which was mainly attributable to the company's settlement with the U.S. Attorney's Office, in connection with the Middle District of Pennsylvania investigation. The stock continued its plunge after the result declaration. Sign up now to read the complete technical and charting analysis on MoneyGram International at

While the company is evolving and has inked quite a few new collaborations, it still expects its fourth quarter and full year numbers to be on the conservative side. It also moved its full year forecast to the lower side of its previous projections. The company expects its revenue to grow in the range of 7 to 9 percent while its adjusted EBITDA is likely to expand by 9 to 11 percent. While its stock performed well this year, so far, it is likely to face pressure as its much bigger rival cuts down its fees for various money transfer schemes. Such price wars may have negative impact on the company's bottom-line.

MoneyGram International stock is expected to show moderate growth this year as the company continues to feel constant pressure from its much bigger rival Western Union Co. [Free technical Report on WU](1). It also faces competition from online payment processors such as PayPal.

Western Union Cuts Fees

Western Union, the largest entity in the sector, performed poorly in the market. While its stock lost about a quarter of its value last year, the company offered a good 3.70 percent dividend yield. It also approved new share repurchase program worth $550 million. These steps are likely to help reinstate investors' confidence in the stock. However, the company also faces operational and strategic issues.

Western Union commands about 20 percent market share, but the share is constantly declining due to smaller players working on razor share margins. Lower fees charged by these outfits forced Western Union to slash its charges for various transfers in Latin America. The move may help the company to increase its volume, but lower margins are likely to cause negative impact on the company's financial health. The company had made this announcement while releasing its third quarter results and now is in the process of implementing it.

Western Union is also dealing with regulatory issues as it had to close about 7,000 of its Vringo outlets due to compliance concerns. However, in contrast to the previous year, the company stock is expected to perform relatively better. Western Union's new share repurchase program will also help investors in recouping value.


  1. Western Union Co. Technical Analysis [ ]

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