Portfolio Recovery Associates Inc.
) reported third-quarter 2013 income from continuing operations
of $1.02 per share, surpassing the Zacks Consensus Estimate of 88
cents per share. The results also exceeded the prior-year
earnings of 65 cents per share.
Earnings were primarily driven by a surge in revenues, which
was attributable to the continuous improvement in income from
finance receivables. Renewed emphasis on the fee-for-service
businesses also aided the third quarter upside.
In the quarter under review, Portfolio Recovery's net income
came in at $47.3 million or 93 cents per share, up from $33.3
million or 65 cents per share recorded in the third quarter of
Portfolio Recovery's total revenue in the reported quarter was
$197.8 million, soaring 31% from the year-ago revenues. Revenues
also exceeded the Zacks Consensus Estimate of $185 million.
The boost in revenues was driven by an improvement of 30% in
cash receipts to $318 million from $243.8 million in the year-ago
quarter. Cash collections from finance receivables also jumped
27% year over year to $291.7 million from $229.1 million. Call
center and other collections posted a 23.6% increase to $89.5
million, external legal collections increased 20.9% to $48.3
million, internal legal collections surged 29.8% to $33.3 million
and bankruptcy court trustee collections increased 32.4% to
$120.6 million, compared with the prior-year quarter.
Additionally, Portfolio Recovery's revenues from its finance
receivables income were $171.5 million, up 26.3% from $135.8
million in the year-ago quarter. Fee income increased 78% to
$26.3 million from $14.8 million due to a single, large Claims
Compensation Bureau case, thereby aiding Portfolio Recovery's
Operating expenses surged 26.6% year over year to $118.3
million, while operating income also increased 39.3% to $79.5
million. As a result, operating margin increased to 40.2% from
the year-ago quarter level of 37.9%.
Balance Sheet and Capital Structure
As of Sep 30, 2013, Portfolio Recovery's cash and cash
equivalents increased to $108.7 million from $32.7 million
recorded as of Dec 31, 2012. The company had $217.0 million
outstanding under its line of credit as of Sep 30, 2013.
Portfolio Recovery exited the reported quarter with total
assets of $1.5 billion, increasing from $1.29 billion as of Dec
31, 2012. Shareholder equity stood at $816.6 million as of Sep
30, 2013, compared with $708.4 million as of Dec 31, 2012.
The 3:1 stock split that was announced in Jun 2013 went into
effect on Aug 1, 2013. The stock split was structured as a stock
dividend, to be paid to shareholders of record as of Jul 1, 2013.
This is the first stock split being implemented by the company,
which went public in 2002.
On Aug 14, 2013, Portfolio Recovery issued a 3.00% private
placement of convertible senior notes due 2020 worth $250
million. The net proceeds from the issuance were used temporarily
to repay the outstanding debt under the company's revolving
credit facility and to repurchase shares worth $50 million. The
remaining proceeds were held in cash equivalent balances at the
end of the third quarter of 2013. This resulted in a sequential
surge in the cash and cash equivalents.
Portfolio Recovery's bottom-line results have shown steady
improvement over the past few quarters. Strong cash collections
drove revenues upward, while an increase in operating income
drove operating margin higher.
The better-than-expected results represent Portfolio
Recovery's focus on capitalizing on its competitive advantages in
a promising debt buying and collections marketplace. Further,
tough demand shocks in the debt buying market have led to the
exodus of competitors from the market. This benefited Portfolio
Recovery in gaining market share and make investments in new
portfolios of debt during the first nine months of 2013.
Higher cash balance, total assets and shareholder equity
strengthened the balance sheet as well. After reporting a decline
since the beginning of the year, fee income improved
substantially during the third quarter, banking on the Claims
Compensation Bureau case. Overall, the third-quarter results were
The Western Union Company
) reported third-quarter 2013 operating earnings of 39 cents per
share, 4 cents ahead of the Zacks Consensus Estimate of 35
Euronet Worldwide Inc.
) reported third-quarter operating net income of 51 cents per
share, beating the Zacks Consensus Estimate of 48 cents by
MoneyGram International Inc.
) reported third-quarter 2013 earnings per share of 31 cents,
missing the Zacks Consensus Estimate by a penny.
Portfolio Recovery carries a Zacks Rank #2 (Buy).
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