Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Moneygram International (NASDAQ:MGI) have fallen by nearly 10% today after the money-transfer company reported underwhelming earnings for its fiscal fourth quarter following Thursday's close.
So what: Moneygram's quarterly revenue of $349.6 million actually topped Wall Street's expectations, which had called for just $345.1 million in revenue, despite suffering a 9% year-over-year decline. However, Moneygram's adjusted earnings of $0.18 fell well below analysts' consensus target of $0.23 in EPS.
Total transactions dipped by 2%, with growth in transfers from the U.S. to other countries and in non-U.S. transactions offset by a huge 40% decline in domestic transactions. CEO Pamela H. Patsley blamed the disappointing quarter on "significant competitive actions" in the company's U.S. market, but she also sounded an optimistic note that the company's new strategic focus will pay off over the long term.
This wasn't backed up by Moneygram's guidance for the 2015 fiscal year, which now calls for flat revenue in constant-currency terms -- translating to a 3% decline after accounting for currency exchange rates -- with adjusted EBITDA falling by 8% to 12% in constant-currency terms. Analysts seem to be mostly on board with this guidance, as their projections had called for full-year revenue of $1.41 billion for 2015, which is a 3% decline from 2014's $1.45 billion in revenue.
Now what: Money-transfer services have come under increasing pressure in recent years as a wide range of companies and technologies spring up as competitors. Moneygram has been one of the hardest hit in this sector, as its shares have lost more than half their value in the past year. The company's shares are trading at a rock-bottom P/E of just 6.8 today; but without a dividend to tide investors over, this low P/E only means that Moneygram is cheap if it can actually turn its fortunes around. I'm not convinced that Moneygram will be a long-term winner in the money-transfer battle royal, so I'm content to stay on the sidelines for the time being.