EZCorp Shanks Estimates, but the Pawn Shop Expands in Q1

• Posted by Danny
• on January 19th, 2012

The pawn broker kicks off the earnings season for our New Banks of America.

 

Apparently Santa wasn’t very kind to our little pawnie this holiday season. Though net income grew at a steady pace compared to last year, Christmas sales were a tad soft, in part leading to an EPS miss of 3 cents. The Street was thinking 81 cents, but EZCorp ($EZPW) spit out 78 cents per share. We were waaay off on our Estimize figure of 87 cents.

Revenues were pretty much in-line though, and going forward EZPW sees full year 2012 EPS coming in at $3.05-3.10 vs. $3.05 estimate.

Here’s the Q1 YoY breakdown:

• Revenue +14%
• Net income (non-GAAP) +14%
• Net income (GAAP) +43%
• Store level operating income +14%
• Strategic affiliate income +24%

Some other interesting tidbits from Q1:

• U.S. Pawn revs +15%
• U.S. Pawn acquired 24 stores
• Mexico Pawn revs +56%
• Mexico Pawn opened 14 stores
• EZMoney revs -1%
• Will acquire 60% of Mexico’s Crediamigo

From the CEO:

“Our performance was in line with our expectations as we made planned investments in talent and technology to support our long term growth strategy.  We also experienced some headwinds as U.S. holiday sales were soft; gold prices declined inside the quarter; and we were negatively impacted by currency exchange rates in Mexico.  We were able to offset all of this with our double digit revenue growth, margin expansion, and expense controls inside our base business.”

Another headwind looming on the horizon is the upcoming showdown between the USCFP Bureau (created by that pesky Act known as Dodd-Frank) and the payday lending industry. Hearings were held today in our good ol’ home state of Alabama about the role the bureau should play in the future. Apparently Birmingham is home to more payday lenders per capita than any other city in the nation. Roll tide.

 

 

Ranked #4 in the BeanScreen this month, we’ve owned shares in EZPW for more than 2 years now. Over the last 29 months EZ’s stock price has just about doubled.

The economy since 2008 has provided the pawn shops and payday lenders a very sweet spot to thrive in. Even as the U.S. economy slowly gets its legs back under it, we believe that the pawn brokers/lenders have already carved out a special niche that is here to stay.

Next week Cash America ($CSH) and First Cash ($FCFS) report. We’re expecting strong results from both of them…but we may need to lower those estimates a bit.

 

sources: Ezcorp reports higher Q1 results – Reuters

EZCORP Reports 14% Growth in Net Income – Yahoo! Finance

EZCorp acquires Mexico company – Austin Business Journal

Consumer Bureau Focuses on Payday Lending – Bloomberg

Consumer bureau’s Richard Cordray has 3 main tasks – CNN Money

 

disclosure: we currently own shares in EZPW, CSH and FCFS

 

 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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