Portfolio Recovery Associates Inc.
) reported fourth-quarter income from continuing operations of
$1.54 per share, which surpassed the Zacks Consensus Estimate of
$1.52 and prior-year earnings of $1.20.
Operating income amounted to $26.6 million, compared with $20.6
million in the fourth quarter of 2010. Earnings were primarily
driven by strong top-line growth attributable to continuous
improvement in cash collections from both bankruptcy and core
portfolios, partly offset by weak performance in the
Portfolio Recovery's total revenue in the reported quarter was
$118.1 million, showing a 17% upside from $100.8 million in the
The boost in revenue was driven by a growth of 22% in cash
receipts to $195.7 million from $160.3 million in the prior-year
quarter. Portfolio Recovery applied 43.0% of its cash collections
to reduce its owned debt portfolios, up from 41.3% in the year-ago
Cash collections jumped 25% year over year to $180.3 million
from $144.4 million in the year-ago period. Call center and other
collections posted a 14% increase, external legal collections
gained 23%, internal legal collections grew 37% and purchased
bankruptcy collections rose 33.5%, compared with the prior-year
However, Portfolio Recovery's revenue from its fee-for-service
businesses declined 4% to $15.3 million in the reported quarter,
mainly due to decrease in revenue from PRA Location Services.
Full-Year 2011 Highlights
For full-year 2011, Portfolio Recovery reported operating income
per share of $5.85, which surpassed the Zacks Consensus Estimate of
$5.78 and prior-year earnings of $4.35. Operating income amounted
to $100.8 million, compared with $73.5 million in 2010.
Portfolio Recovery's revenue amounted to $458.9 million in 2011,
showing a year-over-year increase from $372.7 million.
Balance Sheet and Capital Structure
During the reported quarter Portfolio Recovery spent $88.9
million on portfolio acquisitions to purchase $1.21 billion of
finance receivables. This debt was acquired in 83 portfolios from
12 different sellers to further improve collector productivity and
strengthen the fee businesses.
During the reported quarter, Portfolio Recovery had net
repayments of $40 million on its line of credit, leaving it with
$220 million in outstanding borrowings at quarter end. The
remaining borrowing availability under the line was $187.5 million
as of December 31, 2011, while cash balances were $26.7 million,
down from $41.1 million as on December 31, 2010. Portfolio recovery
exited the quarter with total assets of $1.07 billion and
shareholders' equity of $595.5 million.
Portfolio Recovery's bottom-line results have shown great
improvement over the past few quarters. Strong cash collections
coupled with improved operational efficiency led to an increase in
both the top and bottom lines in the reported quarter. Moreover,
the strong operating performance in the quarter enabled the company
to achieve a net income over the $100 million mark for the first
Increase in cash collection also enabled the company to repay a
substantial portion of its borrowings, thereby improving the
debt-equity ratio. The company also benefited from the long-term
investments made over the past several years. However, the revenue
of the fee-for-service business has been spiraling downward over
the past few quarters and the company needs to focus on improving
the segment's performance.
Portfolio Recovery's competitor
Encore Capital Group Inc.
) reported fourth quarter operating income of 67 cents per share,
beating the Zacks Consensus Estimate of 64 cents and prior-year
earnings of 56 cents.
Currently, Portfolio Recovery carries a Zacks #3 Rank, implying
a short-term 'Hold' rating. Considering the fundamentals, we
maintain our long-term 'Outperform' recommendation on the
ENCORE CAP GRP (
): Free Stock Analysis Report
PORTFOLIO RCVRY (
): Free Stock Analysis Report
To read this article on Zacks.com click here.