Morgan Stanley Cites 'Elevated Risk' in Western Union's Growth Plan
Morgan Stanley reiterated an Underweight rating and a $7 price target on Western Union Co. (NYSE: WU), stating that while the company's medium-term financial targets were clearly outlined, execution risks remain elevated due to past challenges in its retail business.
Western Union laid out three-year financial goals that include a compound annual revenue growth rate (CAGR) of 7%, or 3% excluding its recent Intermex acquisition. This would bring total revenue to a range of $4.8 billion to $5.3 billion by 2028. The company also targets adjusted earnings per share of $2.30, which reflects an 11% CAGR.
The company's forecast projects that digital payments revenue will grow organically by 8% to reach up to $1.5 billion. In contrast, retail revenue is expected to decline by 4% to approximately $2.2 billion, excluding the Intermex business. The consumer services segment is anticipated to have the fastest expansion, rising 20% annually to as much as $1 billion.
Management anticipates generating $1.7 billion in free cash flow over the next three years, aided by $150 million in cost efficiencies. However, Morgan Stanley expressed caution, noting that achieving these goals would be difficult. The brokerage highlighted declining North American retail volumes, competitive pressures in key U.S.-Latin America corridors, and risks associated with integrating Intermex. Morgan Stanley's own forecast calls for just 1% revenue growth excluding Intermex between 2025 and 2027.
More information on the company's background is available in its overviews of company history and corporate vision.
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