Western Union Co. stock gained the most in 10 months after Merrill Lynch & Co. and Morgan Stanley analysts said a rebound in money transfers to Mexico was positive for shares of the biggest U.S. money-transfer business.
Total remittance transactions to Mexico jumped 6 percent in July from the same time last year, compared with a 2 percent decline a month earlier, wrote Merrill Lynch analysts led by Gregory Smith, citing Bank of Mexico data.
“This is a key sign we were looking for and indicates stabilization, in our view, even with the weak construction market and immigration uncertainty,” Smith wrote in a note to investors. “Western Union’s two challenged areas – Mexico and Domestic Consumer-to-Consumer – showed improvements in transaction growth rates last quarter, and we think the worst should be behind the company.”
Western Union shares climbed $1.27, 6.7 percent, to close at $20.10, the biggest gain in the Standard & Poor’s 500 Index. That’s the largest advance since Oct. 25.
The stock has dropped 17 percent this year through Aug. 31, compared with a 10 percent gain in the Standard and Poor’s 500 Information Technology Index.
The remittance data is the “first material piece of good news in a while” for Western Union, wrote Morgan Stanley analyst Charles Murphy.
Douglas County-based Western Union reported a second-quarter profit drop of 6.6 percent in July as revenue from its U.S.-to-Mexico transfer business declined amid intensifying competition and stricter immigration laws.
