Western Union Co., the biggest U.S. money-transfer business, said third-quarter profit rose 7 percent in its first report as a stand-alone company after being spun off last month from First Data Corp.
Net income was $258.1 million, or 34 cents a share, the company said in a statement. Englewood-based Western Union said it would have earned $241.9 million a year earlier, or 32 cents, had it been independent. The average estimate of 19 analysts surveyed by Thomson Financial was 28 cents a share. Revenue rose 12 percent to $1.14 billion.
“Often in these spinoffs, the companies position themselves to do well out of the gate,” said Rod MacKinnon, portfolio manager at Mountain Pacific Investment Advisers Inc. of Boise, Idaho, which owns 420,432 shares. “They guide the expectations to a point where they can beat the initial forecasts, and consequentially the stocks tend to do well initially.” The shares gained 7 percent since trading began.
Western Union, which had been Greenwood Village-based First Data’s biggest and fastest-growing unit, must now square off by itself against rival money-transfer services including Moneygram International Inc., whose quarterly profit rose 1.7 percent. At the same time, the Arizona attorney general is seeking to halt Western Union transfers from 29 states as part of a Mexican smuggling probe.
First Data said before the spinoff that U.S. government proposals to crack down on illegal immigration reduced revenue from migrant workers, who fear authorities will use money- transfer records to track them down.
Arizona Smuggling Probe Similar concerns contributed to a 5 percent drop in domestic money transfers during the quarter, the company said. Cash sent to Mexico from the U.S. increased 4 percent, which the company said was a slower rise than the last two years.
Western Union has been battling Arizona over its seizure of money transfers of $500 or more bound for 26 locations in Sonora, Mexico. Attorney General Terry Goddard said much of the money was sent to drug and immigrant smugglers. The company won a temporary stay, and a hearing was scheduled for Oct. 30. Western Union customers sued Arizona earlier this month, claiming the state’s seizure of the cash is unconstitutional.
Expenses related to the spinoff from First Data were $14 million for the quarter.
The company forecast revenue growth of 11 percent to 12 percent for the full-year 2006 and operating income, excluding spinoff costs, rising 4 percent to 6 percent. For 2007, the company said it expects revenue growth of 10 percent to 12 percent and operating income growth of 6 percent to 9 percent excluding spinoff costs.
Shares of Western Union fell 5 cents to $19.58 today in New York Stock Exchange composite trading. The earnings were reported after the end of regular trading.
Western Union operates in more than 200 countries through an agent network with more than 285,000 locations.
