Money transfer giant Western Union (WU) reported a 6.6% profit decline from a year ago, but its uninspired outlook for 2010 scared investors most, sending its stock price down more than 9.5% in early morning trading.

The company reported a profit of $223.7 million or 32 cents a share and revenues of $1.31 billion for the fourth quarter of 2009. A year earlier, the company posted a profit of $239.6 million, or 34 cents a share, on revenues of $1.29 billion. Operating margins declined to 24.2% from 25.9% last year, largely because of two acquisitions.Considering the headwinds the company faced last year, including dealing with the global recession and incorporating the acquisitions, delivering any profit at all could have been viewed as positive. Unfortunately, the company gave somewhat disappointing guidance for 2010, forecasting revenues to come in between negative 1% and plus 2%. Given the company's recent increase in its annual dividend from 4 cents to 24 cents, and its plan to buy back $1 billion shares of stock, which indicate strength, some analysts were confused.

When Western Union President and Chief Executive Officer Christina Gold said the company had "maintained strong margins, gained market share, and generated substantial cash flow, demonstrating the stability of our business model," many of the analysts on the Wednesday morning earnings call agreed, and tried to determine why Gold and her team weren't more positive about 2010.

Gold said the company was being "realistic," given the tremendous unemployment and economic uncertainty in three major markets it serves, the U.S., Mexico, and the Middle East. She also pointed out that as different markets around the world are in different stages of recovery, it is difficult to forecast long term growth. Costs associated with the acquisitions of the European money transfer business of FEXCO and Custom House Ltd., which serves the international business-to-business market, will impact the margins in 2010, but not for 2011.

Analysts' questions during the earnings call did clarify some of the uncertainty the initial guidance raised. Gold said she was confident that the customer-to-customer segment, which accounts for more than 85% of the company's revenues, would expand in 2010, which calmed many fears. Also after questioning, analysts felt the integration costs associated with the acquisitions, and the cost of investments in building out new areas of business, including online money transfers and mobile transfers, would have less of an impact than what the company believed.

Even with the uncertainty, Morningstar equity analyst Brett Horn believes Western Union is attractive. "Western Union produced $1.1 billion in free cash flow in 2009, providing a very healthy 8% yield at the current market price."

By midday, the stock was beginning to recover from the disappointing outlook but was still off 6.74%, trading at $17.58.

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