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Western Union (WU) Upgraded To 'Buy' By Deutsche Bank, PT Raised

 February 04, 2013 02:38 PM

(By Balachander) Western Union Co. (NYSE: WU) shares were upgraded to "Buy" from "Hold" and price target increased to $19 from $14 by Deutsche Bank (DB).

"Although sentiment remains negative on WU, we see a market setting up well for a WU turnaround," the bank wrote. "The macro environment appears to have bottomed globally and vols should begin to accelerate."

The bank said recent US housing starts bode well for migrant employment opportunities in construction (large migrant transfer base). In addition, the increased likelihood of US immigration reform (WU a long-time supporter) augurs well for WU to see increased vol.

[Related -Dividend Roundup: BDC, CM, DE, EMC, SALM, WU]

DB believes WU's decision to reset pricing down mid-single digits in 2013 will result in share gains. The bank sees 50 percent of the pricing change from one-time regulatory changes from the Southwest Border Agreement, with much of the remaining cuts as an extension in WU's strategy to embrace new distribution channels.

The bank expects WU to move pricing back to its normal 1 percent - 3 percent range in 2014 as revenue turns positive and margins accelerate. Importantly, DB said WU deserves a pricing premium due to its trusted brand, mass distribution capabilities (location, .com, mobile, etc.) and fully compliant platform.

Shares of the money movement and payment services provider advanced 1.74 percent to trade at $14.63 on Monday. The stock has been trading in the 52-week range of $11.93 to $19.82.



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