Ezcorp Inc.'s shares fell sharply Wednesday after the pawn store operator's fiscal fourth-quarter revenue fell short of expectations and it issued a weak forecast.
THE SPARK: The company reported after the market closed Tuesday that its net income for the June-to-September period increased 6 percent to $38.6 million, or 75 cents per share, for the period. Total revenue increased 10 percent to $258.4 million as fees, charges and sales all rose.
Analysts, on average, were expecting the company to earn 75 cents per share on revenue of $261.4 million, according to FactSet.
THE BIG PICTURE: Ezcorp's revenue shortfall disappointed investors and it forecast earnings of $2.55 to $2.80 per share for its fiscal 2013; analysts were expecting $3.15 per share.
The Austin, Texas-based expects a decline in its first quarter, with earnings between 55 and 60 cents per share, due to the weakness in the gold market, regulatory pressures in Texas and other issues. Analysts were expecting 81 cents per share.
THE ANALYSIS: Sterne Agee analyst Henry Coffey Jr. said that the company made the profit gains largely on an accounting adjustment. He said Ezcorp continues to be challenged by acquisition-related costs, increases in corporate overhead and shrinking gold margins.
Coffee has a "Neutral" rating on the company's shares and $24 price target.
SHARE ACTION: Shares fell $2.93, more than 14 percent, to $17.82 in afternoon trading amid a steep market decline. Earlier in the session, the stock dropped as low as $17.02, a level last seen in early 2010.