* 4th-qtr profit $0.31/shr vs est $0.32
* Tightens compliance cost guidance for 2014
* Announces $500 mln share buyback
By Neha Dimri
Feb 11 Western Union Co said it expects
the high compliance costs that hit its earnings in the fourth
quarter to ease in 2014, helping to push up the company's shares
after the bell.
The world's largest money-transfer company reported a 27
percent drop in quarterly profit, largely due higher costs
linked to tightened regulations to prevent money laundering.
"We expect (compliance) costs in 2014 to be 3.5 to 4 percent
of our revenue ... That is (also) probably the pickable range
for 2015," interim Chief Financial Officer Raj Agrawal told
Reuters after the company announced results on Tuesday.
Western Union said in October that it did not expect
earnings growth in 2014 due to higher compliance costs, which it
pegged at 3.5-4.5 percent of revenue.
"The tighter range on compliance costs reflects management
getting a somewhat better handle on how the new regulatory
requirements will affect the company going forward," BTIG
analyst Mark Palmer said.
Western Union, which gets most of its business from migrant
workers sending money home, said it expected earnings of $1.40
to $1.50 per share in 2014, based on low-to-mid-single digit
percentage growth in revenue on a constant-currency basis.
The guidance met expectations that were cut sharply after
the company's comments accompanying its third-quarter results in
Western Union, which also announced a $500 million share
buyback, said it expected to be less aggressive with price cuts
for its money-transfer products in 2014.
Smaller rival Money Gram International Inc reported
a stronger-than-expected profit earlier on Tuesday, but warned
of incremental compliance-related and restructuring costs.
"We continue to view Western Union as well-positioned to
take market share from competitors unable to adjust to the
industry-wide compliance cost increases," Palmer said.
PROFIT MISSES ESTIMATES
Western Union has cut prices and invested heavily in its
online and mobile businesses to better compete with fast-growing
rivals such as MoneyGram, Xoom Corp and Boom Financial
Agrawal said he did not expect Western Union to be as
aggressive with price cuts as it was in 2013, although he added
that "if pricing is required to be adjusted we will do it."
Western Union's net income fell to $173.4 million, or 31
cents per share, in the quarter ended Dec. 31, from $237.9
million, or 40 cents per share, a year earlier. Revenue dropped
marginally to $1.42 billion.
Transaction volumes rose 9 percent to 64.19 million in the
fourth quarter from a year earlier, while remittances increased
to $21.5 billion from $20 billion.
Analysts on average had expected the company to earn 32
cents per share on revenue of $1.43 billion, according to
Thomson Reuters I/B/E/S.
Western Union's stock had dropped about 18 percent up to
Tuesday's close since the company's last quarterly results.
The company's shares rose 2 percent in extended trading
after closing at $15.88 on the New York Stock Exchange.