) to neutral from outperform.
Analyst Dris Upitis says he cut on growth and margin concerns. In the Payment unit, he estimates foreign exchange, acquisitions, and investment gains contributed 5% to 7% to revenue growth. He calculates investment gains may be contributing 2% of growth and 300 basis points in operating margin, which may be blurring the reality of Western Union's current level of growth and profitability.
He notes the company's merchant-alliance structure may encounter its first real challenges. Also, TeleCheck continues to weigh on profitability and there's a mix shift toward lower-revenue debit cards. Upitis cut the $2.45 2005 EPS estimate to $2.38 and set a $42 target.