UPDATE 3-Western Union Q2 profit tops Street as remittances rise

* Q2 EPS $0.37 excl items vs est EPS $0.32

* Q2 total rev up 2 pct to $1.27 bln

* Sees FY EPS $1.31-$1.36 excl items

* Sees domestic revenue growth for 2010

* Sees margins in C2C segment higher in 2010 vs last yr (Recasts, adds conference call details, CEO, CFO, analyst comments, updates share movement)

By Brenton Cordeiro

BANGALORE, July 27 (Reuters) - Western Union Co (WU.N) reported a quarterly profit above Wall Street estimates due to a rise in the use of the company's remittance services across the globe, and said it would see U.S. domestic revenue growth later this year.

Western Union had been suffering as consumers sent less money globally due to the recession. However, during the quarter, volume of domestic transactions rose 28 percent from an 8 percent decline in the year-ago period.

On a post-earnings call, the world's largest payment transfer company said it expects margins in its consumer-to-consumer segment to be higher this year than in 2009.

"As the market improves, revenue accelerates, and we believe we have a business model that can drive margin expansion," Chief Financial Officer Scott Scheirman told Reuters by phone.

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For a graphic on Western Union's Q2 results, see:

link.reuters.com/pyj79m

Reuters Insider video: Analyst John Kozey looks at Western Union results.

link.reuters.com/vyr79m

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Revenue from Western Union's consumer-to-consumer segment, representing 84 percent of the company's revenue, was $1.1 billion, an increase of 2 percent on a constant-currency basis.

This is the third consecutive quarter that the company has seen growth in transactions.

Western Union, which competes with MoneyGram International (MGI.N), said it handled 53 million consumer-to-consumer transactions in the second quarter, a 9 percent increase from the prior year.

"Transaction trends increased, and we delivered solid margins," Chief Operating Officer and CEO-elect Hikmet Ersek said.

For the full year, the world's largest payment transfer company said it expected earnings of between $1.31 and $1.36 per share, excluding restructuring charges. Analysts were expecting a profit of $1.32 per share.

In May, Western Union said it would cut about 175 jobs globally and streamline its senior management structure, seen as the first major move by CEO-elect Hikmet Ersek after being named to the top job. [ID:nSGE64Q0C9]

For the second quarter, net income was $221 million, or 33 cents a share, compared with $220.2 million, or 31 cents a share, last year.

Excluding restructuring charges, Western Union earned 37 cents a share, on a constant-currency basis. The company incurred $35 million in restructuring expenses in the second quarter.

Total revenue rose 2 percent to $1.27 billion during the quarter.

Analysts on average were looking for a profit of 32 cents a share, before items, on revenue of $1.28 billion, according to Thomson Reuters I/B/E/S.

With a solid beat, a guidance raise, progress in fundamentals and a new incoming CEO, investors will be justified in getting a little more optimistic, analyst Adam Frisch of Morgan Stanley said.

In an interview with Reuters, Ersek said it was "too early to tell" if Western Union would be affected by regulations.

"On the consumer protection side we would probably have to disclose some FX rates to the consumers," he added.

Together with its Vigo, Orlandi Valuta, Pago Facil and Custom House branded payment services, Western Union has a combined network of more than 430,000 agent locations in 200 countries and territories.

Shares of the company, which were up over 3 percent in early morning trade Tuesday on the New York Stock Exchange, pared gains later to trade up 4 cents at $16.72.

(Reporting by Brenton Cordeiro in Bangalore; Editing by Vinu Pilakkott, Prem Udayabhanu)