On Apr 4, Zacks Investment Research downgraded DFC Global Corp. (DLLR) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Following the announcement of fiscal third-quarter preliminary results and a lowered fiscal 2013 guidance on Apr 1, DFC Global witnessed sharp downward estimate revisions. All 4 estimates for 2013 as well as 2014 moved south. In addition, the share price experienced a 52-week low of $12.95 on the same day.
DFC Global lowered the fiscal 2013 earnings expectation to $1.70 to $1.80 per share from $2.35 to $2.45 per share guided earlier. The Zacks Consensus Estimate is just a penny above the low end of the company’s guidance.
Additionally, in the prelim result, DFC Global revealed that it expects operating earnings between 20–24 cents for the third quarter of fiscal 2013. This is substantially lower from 53 cents earned in the year-ago quarter. The Zacks Consensus Estimate is at the midpoint, representing a year-over-year decline of 59.4%.
DFC Global’s management also stated that due to new loan rollover limitations (three loan rollovers per customer) several outstanding short-term consumer loans in the United Kingdom became immediately due, resulting in a temporary ‘credit crunch’ for the customers. As a result, the company is facing more loan defaults in its UK business, which in turn weighs on the earnings. In anticipation of the increasing number of loan defaults, DFC Global constricted the lending-underwriting norms, which again is weighing on loan growth in UK.
While the Zacks Consensus Estimate for 2013 slumped 29% to $1.71 over the last 7 days, the same for 2014 dropped 30% to $2.00 over the same period.
Other Stocks to Consider
Among other financial service companies, Euronet Worldwide Inc. (EEFT) , Moody's Corp. (MCO) and SS&C Technologies Holdings, Inc. (SSNC) carry a favorable Zacks Rank #1 (Strong Buy) and appear impressive.
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