UPDATE 2-Western Union Q2 earnings fall as remittances slow

* Q2 profit per share 31 cents, slightly above forecasts

* Revenue fall 7 percent to $1.3 billion

* Company reiterated 2009 revenue and EPS outlook

* CEO sees challenges in U.S., Mexico

* Shares fall 5.2 percent to $17.30 (Updates with CEO comments, byline, stock price)

NEW YORK, July 21 - Western Union Co, the world's largest payment transfer company, reported lower second-quarter earnings on Tuesday, as recession slowed global remittances.

Net income fell to $220 million from $232 million a year earlier. However, earnings per share were flat at 31 cents due to lower outstanding shares.

Analysts on average expected the Englewood, Colorado, company to report a profit of 30 cents a share.

Revenue dropped 7 percent to $1.3 billion, impacted by a 12 percent contraction within the United States and Canada, and a 20 percent decline in Mexico.

"The biggest issue is the uncertainty out there. As you read many reports, people feel like the worst has happened or that we are coming to a turn, but I'm not sure," Chief Executive Christina Gold said in an interview.

"We are dealing with consumers and people who are concerned about jobs, and the overall economic environment, and what is going to happen to them in this economy," she said.

Gold added businesses will remain under stress in the United States and Mexico -- the company's two largest markets -- for the rest of 2009, as rising unemployment hurts Hispanic immigrants.

"People are still here, but they are holding onto their money. They are not sending as much or as often because obviously they have concerns about what is going to happen," Gold told Reuters in an interview.

The company reiterated its 2009 revenue and earnings per share outlook. Western Union expects constant currency revenue to be down in a range from 2 percent to 5 percent, and constant currency earnings per share in a range of $1.16 to $1.26.

Western Union, best known for its telegrams, has been suffering as consumers send less money globally due to the recession. Transaction growth had slowed in previous quarters.

The company's shares fell 5.2 percent to $17.30 in early afternoon trading on the New York Stock Exchange.