Encore Capital Group Inc.
) shares gained 1.3% in the last trading session to close at $43.70
after the company reported a solid second-quarter 2014 earnings
results. Though operating earnings of $1.06 per share missed the
Zacks Consensus Estimate by 1.9%, it improved a significant 25%
year over year, driven by strong growth in collections, in turn
supported by geographic expansion and strategic capital
Encore Capital Group, Inc - Earnings Surprise |
Encore Capital reported net income of 86 cents per share in the
second quarter, up from 44 cents in the year-earlier quarter. The
figure included the impact of convertible notes non-cash interest
and issuance cost amortization of 6 cents per share and acquisition
related legal and advisory fees of 14 cents per share.
Total revenue at Encore Capital increased 72% year over year to
nearly $269.2 million. Moreover, the top line surpassed the Zacks
Consensus Estimate of $265 million. The year-over-year upside was
fueled by significantly higher revenues from the receivable
portfolio as well as improvement in other revenues and interest
income during the quarter.
Gross collections of $409.3 million from the purchasing and
recovery business escalated 47% year over year.
Total operating expenses of $190.7 million shot up 51% year over
year from $103.9 million. The increased expenses resulted from
higher salaries and employee benefits, cost of legal collections,
other operating expenses, collection agency commissions and higher
general and administrative expenses. Adjusted operating expenses
increased to 37.9% from 37.8% in the prior-year quarter.
Meanwhile, Encore Capital's second-quarter adjusted earnings
before interest, taxes, depreciation and amortization (EBITDA)
improved 48% year over year to $255.8 million.
As of Jun 30, 2014, total assets of Encore Capital stood at $3.6
billion, highlighting a rise from $2.7 billion as of Dec 31, 2013.
As of Jun 30, 2014, Encore Capital's cash and cash equivalents
totaled $123.4 million, down from $126.2 million as of Dec 31,
Investment in Receivable portfolio totaled $1.99 billion at Jun 30,
2014, up from $1.6 billion at 2013-end.
Total debt amounted to $2.7 billion, up nearly 47% from $1.9
billion at 2013-end.
As of Jun 30, 2014, total shareholders' equity stood at $571.5
million, down from $575.9 million at 2013-end.
Encore Capital's second-quarter earnings missed the Zacks Consensus
Estimate but improved over the year-ago numbers on higher
collections. Although expenses increased during the quarter,
revenues improved at a higher pace, leading to margin expansion.
The company's relentless focus on enhancing core operations and
geographic expansion positions it well for long-term growth.
Recently, Encore Capital acquired Atlantic Credit & Finance
(ACF), an entity that collects fresh, higher-balance accounts. We
view the transaction favorably as it is expected to boost the core
business of the company and enhance customer service significantly.
The long-term growth rate of the company is pegged at 14.5%.
Performances by Others
Discover Financial Services (
) reported second-quarter 2014 earnings per share (EPS) of $1.35,
which exceeded the Zacks Consensus Estimate of $1.30.
Rise in auto finance revenues drove Ally Financial Inc.'s (
) second-quarter 2014 adjusted earnings to 42 cents per share. The
figure outpaced the Zacks Consensus Estimate of 32 cents.
Sallie Mae (
) second-quarter 2014 core earnings stood at 10 cents per share
that outpaced the Zacks Consensus Estimate by a penny.
Encore Capital presently carries a Zacks Rank #3 (Hold).
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