Encore Capital Beats on Q3 Earnings and Revs

Zacks

Encore Capital Group Inc. (ECPG) reported third-quarter 2013 operating net income of 99 cents per share, which surpassed the Zacks Consensus Estimate of 93 cents by 6.5%. The results also improved significantly by 20.7% from the prior-year quarter number of 82 cents per share.

The bottom-line growth during the quarter was primarily driven by substantial improvement in the top line as well as contribution from the recent acquisition of a controlling interest in Cabot Credit Management.

Encore Capital reported net income of 82 cents per share in the third quarter, on par with year-ago earnings. The net income figure included the impact of convertible notes non-cash interest and issuance cost amortization of 4 cents per share, acquisition related legal and advisory fees of 18 cents per share and favorable effect of tax credits applicable to prior periods worth 5 cents per share,

Operational Update

Total revenues of Encore Capital increased 62.2% year over year to nearly $235.5 million. The top line also exceeded the Zacks Consensus Estimate of $206 million by 14.3%. Growth in sales was fueled by significantly higher revenues from receivable portfolio as well as improvement in other revenues during the quarter.

Gross collections of $379.7 million from the portfolio purchasing and recovery business escalated 54% year over year for Encore Capital.

Adjusted operating expenses of $154.7 million shot up 55.2% year over year to $154.7 million. Rise in expenses resulted from higher salaries and employee benefits, cost of legal collections, other operating expenses, collection agency commissions and higher general and administrative expenses.

Encore Capital’s third-quarter adjusted earnings before interest, taxes, depreciation and amortization (:EBITDA) grew 55% year over year to $234.4 million.

During the quarter, Encore Capital completed the acquisition of a controlling interest in Cabot Credit Management that provided the former with opportunities to deploy capital in a new market, in order to derive significant earnings. The acquisition drove Remaining Collections $1.5 billion higher to $4 billion as of Sep 30, 2013.

Financial Update

As of Sep 30, total assets of Encore Capital stood at $2.59 billion compared to $1.17 billion at 2012-end.

At the end of third quarter, Encore Capital’s cash and cash equivalents surged significantly to $110.2 million from $17.5 million as of Dec 31, 2012.

Including $559 million of acquisition of Cabot Credit Management’s portfolio, investment in receivable portfolio totaled $617.9 million during the quarter.

Total debt amounted to $1.8 billion rising from $706 million at 2012-end.

Total shareholders’ equity of Encore Capital increased to $548 million, up 35% from the 2012-end level.

Performances by Others

Regional Management Corp. (RM) reported net income of 61 cents for the third quarter of 2013, a penny above the Zacks Consensus Estimate of 60 cents. Results also improved 3.4% year over year.

Discover Financial Services (DFS) reported third-quarter 2013 earnings per share (EPS) of $1.20, in line with the Zacks Consensus Estimate. However, EPS declined 3.2% from the year-ago quarter’s earnings of $1.24.

Capital One Financial Corp. (COF) reported third-quarter 2013 earnings per share of $1.86, which beat the Zacks Consensus Estimate of $1.77. However, earnings were 7.5% below $2.01 earned in the prior-year quarter.

Zacks Rank

Encore Capital presently carries a Zacks Rank #4 (Sell).

Read the Full Research Report on DFS
Read the Full Research Report on COF
Read the Full Research Report on ECPG
Read the Full Research Report on RM


Zacks Investment Research

Rates

View Comments (0)