EZCORP Beats, Raises Outlook

EZCORP Inc. (EZPW - Snapshot Report), the second largest operator of pawn stores in the United States, announced second quarter 2011 earnings of 63 cents per share, which surpassed the Zacks Consensus Estimate of 57 cents and rose 31% from the year-ago quarter. Results reflect the benefits of double-digit upside in the top line.

The Austin, Texas-based company reported a year-over-year increase of 19% in total revenue to $131.0 million, as same-store sales grew 12%. Segment wise, U.S. pawn operations sales spiked 19.1% to $160.4 million, Empeno Facil sales surged 79.9% to $12.7 million and EZMONEY operations revenue leaped 15.2% to $40.1 million.

Gross margin of the company dropped 30 basis points (bps) from the prior-year quarter to 39.1% while store operating income margin expanded 260 bps to 50%. Though operating expense of the company increased 13.5% to $66.0 million, operating income enhanced 31.7% to $44.9 million.

Store Update

The company continued its expansion with the opening of 22 new stores in Mexico, Canada and United States during the quarter. EZCORP also acquired 5 US Pawn stores during the quarter. The company currently operates more than 1000 stores worldwide

In April, EZCORP acquired Cash Converters franchise rights in Canadaand has also entered into an agreement to acquire 15 pawn stores from Mister Money.

Financial Position

The company ended the quarter with cash and cash equivalent of $59.8 million, up from $51.2 million in the year-ago quarter. At the end of the second quarter, long-term debt was $10.0 million and stockholders' equity was $593.8 million.

Outlook

EZCORP has raised its 2011 adjusted earnings guidance to $2.55 from its previous expectation of $2.40. The GAAP earnings guidance is now projected at $2.41, up from the previous estimate of $2.26.

Our Take

The company reported better-than-expected results and also raised its outlook based on more pawn store acquisitions. Hence, we expect estimates to move up in the coming days. The Zacks Consensus Estimates for 2011 and 2012 are pegged at $2.43 and $2.81, respectively.

The company has a Zacks #2 Rank, which translates into a short-term Buy rating. We also reiterate our long-term Neutral recommendation on the stock.

One of EZCORP’s primary competitors, First Cash Financial Services Inc. (FCFS - Snapshot Report) reported first quarter 2011 earnings of 50 cents per share, which surpassed the Zacks Consensus Estimate of 48 cents on the back of strong pawn operations.

Read the full analyst report on EZPW

Read the full analyst report on FCFS