Western Union (NYSE:WU) posted third-quarter earnings of $0.44 per share on October 30, up 13% year over year on a 2% increase in revenue and reduced costs. The company also increased its full-year guidance, suggesting earnings per share of $1.50 on the back of swelling operating margins.

What you need to know
Western Union, the world's top money-transfer company, can be understood as operating in three different businesses. The company traditionally breaks out its revenue by consumer-to-consumer (C2C), consumer-to-business (C2B), and business solutions.

Some highlights:

  • Consumer-to-consumer revenue was up 4% in constant currency terms on a 5% increase in transactions. This segment made up 80% of revenue.
  • Consumer-to-business revenue grew 11% in constant currency, making up 11% of revenue.
  • Business solutions revenue grew 3% in constant currency, making up 7% of overall revenue.
  • WesternUnion.com posted revenue growth of 21% on transaction growth of 34%. It now makes up 4% of total revenue, which is included in consumer-to-consumer's share of sales. Notably, year-over-year online revenue growth has slowed in the last three quarters, but the company plans to open up the site to new markets in 2015.
  • Operating margin rose to 21.8% from 21% last year, due to cost savings.

One year after lowering its pricing in response to competitive pressures, and hurting profitability in the process, the company isn't pressing as hard on price as it was last year. CFO Rajesh K. Agrawal said on the company's conference call that the company believes "the market has shown fairly stable pricing recently. We have made some price adjustments, both reductions and increases, in various quarters around the world, but we continue to expect our pricing actions for the remainder of the year to be modest." 

Guiding for the future
The company updated its guidance for the full year, reaffirming its single-digit revenue growth expectation but upping its EPS forecast to $1.50 from a range of $1.45 to $1.50. It also guided for operating margin of 20% from a prior range of 19.5%-20%.

Management said in the conference call that cost savings would be offset by some additional spending in the fourth quarter. In particular, the company expects that compliance spending will be in the range of 3.5% of revenue, slightly up from 3% in the third quarter. This isn't particularly concerning, given that increased spending comes as WesternUnion.com prepares to enter new geographical markets. It cut $14 million in expenses for the reported quarter and expects that it can reach its target of $45 million in cost savings for the full year.

All in all, the company's latest earnings report was good, proving that Western Union could grow the top line while cutting some of the fat to boost the bottom line.