The “New Banks” Earnings Finale – Cash America

• Posted by Danny
• on January 26th, 2012

The last in our magnificent trio of pawn shops misses Q4 EPS, but still reports a banner year.

Kinda like EZCorp ($EZPW), who reported Q1 last week, Cash America ($CSH) found the Yuletide to be a bit softer than anticipated. Holiday promos ate into profits as CSH lured customers into its shops. Nevertheless, CSH had a strong Q4 and a record year in 2011.

Yesterday First Cash ($FCFS) rocked the shop with its Q4 and full year.

Here’s the lowdown for CSH’s Q4 YoY:

• Revenue +26%
• Net income +9%
• Merchandise sales +24%
• Loan fees +37%
• Expenses +20%

The CEO spoke to the weaker than expected EPS result:

“The increase in our consumer loan portfolio generated a significant increase in revenue, although an attributable increase in expenses for marketing and loss reserves reduced a portion of the near term contribution to earnings…The holiday selling season achieved the sales objectives we expected but with a greater level of pricing discounts than anticipated…”

And the full year results:

• Revenue +19%
• Net income +18%

Looking ahead, CSH wasn’t able to give next quarter or full year 2012 guidance due to its recently proposed IPO of Enova common.

 

 

So not a bad earnings season for our New Banks. On the whole it seems expectations were a bit loftier than the pawnies could deliver, especially on the EPS front. We’re not gonna complain though as all three still managed to post stout numbers. The industry as a whole may be ready to take a breather as growth has been fantastic over the last few years.

Ranked #38 in the BeanScreen, we’ve owned CSH for about a year and a half now at a cost basis of $38. We added to our position recently at $40.50.

We will continue to hold all three pawnies for the foreseeable future.

On a side note, an old BeanScreen fave, World Acceptance ($WRLD), reported yesterday. They missed estimates as costs related to bad loans and expenses hurt profits. While still fundamentally sound, we decided to cash out a few months ago because, unlike our three pawn brokers, WRLD is strictly a payday/online loan lender. If you’re going to invest in the consumer finance industry, we recommend buying companies that have a more diversified business model.

 

sources: Cash America Announces Fourth Quarter and Fiscal Year-End Earnings and Declares Dividend – Y! Finance

Cash America Q4 profit misses Street on higher costs – Reuters

CashAmerica.com

disclosure:  we currently own CSH, FCFS and EZPW

 

 

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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