Encore Capital Upgraded to Strong Buy

Zacks

On Aug 20, Zacks Investment Research upgraded Encore Capital Group, Inc. (ECPG) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Encore Capital has been witnessing rising earnings estimates on the back of solid second-quarter 2013 results. Moreover, this provider of debt management and recovery solutions delivered positive earnings surprises in the last 4 quarters with an average beat of 4.1%. The long-term expected earnings growth rate for this stock is 14.7%    

Encore Capital reported second-quarter results on Aug 8. Non-GAAP earnings per share came in at 85 cents, surpassing the Zacks Consensus Estimate of 81 cents by 4.9% and the year-ago earnings of 82 cents by 3.6%.

Earnings were primarily aided by solid top-line growth of 10.5%. However, a 23% increase in operating expense limited the upside.   

Encore Capital also acquired Asset Acceptance Capital Corp. and purchased controlling interest in Janus Holdings Luxembourg S.a.r.l., an indirect holding company of Cabot Credit Management. While the acquisition of Asset Acceptance will speed up the rollout of Encore Capital’s Internal Legal platform, acquisition of a controlling interest in Cabot Credit marks its foray into UK debt buying and recovery market.

The Zacks Consensus Estimate for 2013 increased 1.7% to $3.65 per share as most of the estimates were revised higher over the last 30 days. For 2014, more than half of the estimates were revised higher over the same time frame, lifting the Zacks Consensus Estimate by 5.7% to $4.29 per share.

Other Stocks to Consider

Consumer loans provider Capital One Financial Corp. (COF), SLM Corporation (SLM), and Tree.Com, Inc. (TREE) with Zacks Rank #2 (Buy) are also performing well and are worth considering.

Read the Full Research Report on SLM

Read the Full Research Report on COF

Read the Full Research Report on TREE

Read the Full Research Report on ECPG

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