* Sees 2012 EPS $1.70-$1.75, excluding deal integration costs
* Q4 EPS $0.73 vs $0.37 last yr
* Q4 rev up 5 pct
* Shares fall 9 pct after the bell
By Brenton Cordeiro
Feb 7 (Reuters) - Western Union Co, the world's largest payment transfer company, posted a higher fourth-quarter profit, but forecast full-year earnings below market expectations on macro-economic challenges.
For the full year, the company expects earnings per share to be between $1.70 and $1.75, excluding integration costs related to the Travelex Global Business Payments acquisition, below analysts' expectation of $1.80 per share.
"Everybody that so far has reported has said that things are either staying the same or getting better, and it almost sounds like they expect things to get a little worse," analyst John Kraft of DA Davidson said.
Western Union, with a network of about 485,000 agent locations in 200 countries and territories, said it expects softness in Europe in 2012.
"While there are some near-term market challenges in parts of the world, the long-term opportunities for revenue growth and margin expansion are strong," Chief Executive Hikmet Ersek said.
Earlier on Tuesday, Western Union said it would raise its quarterly dividend to 10 cents a share, the third such hike in a little over a year.
The company expects constant currency revenue growth in a range of 6 and 8 percent for 2012.
Smaller rival MoneyGram International said last week that it expects revenue to grow between 7 and 9 percent in 2012.
Revenue at Western Union's consumer-to-consumer (C2C) segment, which accounts for 83 percent of the company's overall revenue, rose 3 percent in the quarter.
The company said it expects overall 2012 C2C constant currency revenue trends to be similar to the fourth quarter.
Western Union has been trying to boost its other segments, particularly electronic offerings and services to businesses.
It bought a Travelex unit for about $970 million last July, to expand its international business payments services.
Prepaid cards in force were nearly 1.5 million at the end of the fourth quarter.
Western Union reported a fourth-quarter net income of $452.3 million, or 73 cents per share, up from $242.6 million, or 37 cents per share, a year ago.
The quarter's results also included a benefit of about $205 million in provision for income taxes related to an agreement with the U.S. Internal Revenue Service in December.
Shares of company, which have gained almost 34 percent since last October, fell 9 percent to $18 in trading after the bell. They closed at $19.70 on Tuesday on the New York Stock Exchange.