EZCORP Posts Encouraging 4Q

EZCORP Inc. ( EZPW - Snapshot Report ) , the second largest operator of pawn stores in the United States, reported fourth quarter 2011 earnings of 72 cents per share, surpassing the Zacks Consensus Estimate of 70 cents and 28.6% higher than the year-ago level. Results reflect strong performance across all the company’s business segments.

Total revenue for the quarter under review increased 18% year over year to $234.1 million, backed by 8% same-store sales growth.

The company’s full-year adjusted earnings per share were $2.57, up 31% year over year. Total revenues were $869.3 million in full fiscal 2011, representing a year-over-year growth of 19.0%, driven by a 10% rise in same store revenue.

Quarter Performance

Segment wise, U.S. pawn operations sales rose 16.0% to $170.2 million driven by a 6% rise in comps, Empeno Facil sales surged 87% to $17.9 million benefiting from 32% same-store sales growth and EZMONEY operations revenue leaped 9% to $45.9 million, due to an 8% growth in comps.

Gross margin of the company expanded 30 basis points (bps) from the prior-year quarter to 41.7% while store operating income rose 33% with margin enhancing to 52%. Though operating expense of the company increased 11.9% to $69.8 million, operating margin improved 245 bps to 36%.

Store Update

The Austin, Texas-based company pursued further expansion in the US Pawn segment with new store openings in the reported quarter and overall 11% growth in 2011. During the quarter, EZCORP also emerged as a leading pawn operator in San Antonio by acquiring 15 pawn stores in the region.

The company also expanded its Empeño Fácil segment by adding 23 new stores. The company currently operates more than 1100 stores worldwide.

In April, EZCORP acquired Cash Converters franchise rights in Canada and currently 15 out of 64 company-owned stores are successfully operating under the Cash Converters brand.

Financial Position

The company ended the year with cash and cash equivalent of $24.0 million, up from $51.2 million in the year-ago quarter. At the end of the fourth quarter, long-term debt was $10.0 million and stockholders' equity was $593.8 million.

Outlook

EZCORP expects 2012 earnings per share in the range of $3.05 to $3.10, up 20% from 2011 adjusted earnings of $2.57 per share.

Our Take

The company posted encouraging results for the fourth quarter of 2011, registering year- over-year upside in both the top line and bottom line. The company also continues to focus on new store growth, expansion and initiatives to improve services and drive traffic. Hence, we expect estimates to move up in the coming days. The Zacks Consensus Estimates for 2011 and 2012 are pegged at $3.07 and $3.53, respectively.

The company has a Zacks #3 Rank, which translates into a short-term Hold 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 third quarter 2011 earnings of 59 cents per share, which surpassed the Zacks Consensus Estimate of 55 cents on the back of double-digit revenue growth.