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EZCORP's EPS Misses, Revenues Grow

EZPW FCFS

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Austin, Texas-based EZCORP Inc (EZPW - Snapshot Report) recently reported first quarter 2012 earnings of 78 cents per share, below the Zacks Consensus Estimate of 81 cents, but up 13.0% from the year-ago adjusted earnings of 69 cents. The lower-than-expected results were due to weak U.S holiday sales, drop in gold prices and unfavorable currency impact.

Total revenue in the quarter jumped 14% year over year to $248.9 million, backed by growth in the US pawn and Empeno Facil business.

Quarter Performance

Segment wise, U.S. pawn operations sales rose 15.0% to $184.5 million, driven by a 2% rise in comps and higher Empeno Facil sales (up 56% to $19.4 million) benefiting from 15% same-store sales growth. However, EZMONEY operations revenue fell 1% to $45.0 million, due to a 2% drop in comps.

Store operating income rose 14% with margin enhancing to 52%. Though operating expense of the company increased 15.5% to $74.5 million, operating income was impressive at $54.8 million, up 9% on adjusted basis.

Expansion Update

The second largest operator of pawn stores in the United States continued to expand in the US Pawn segment and EZCORP acquired 24 units during the quarter.

The company also expanded its Empeño Fácil segment by adding 14 new stores. The company currently operates more than 1140 stores worldwide, with 463 pawn stores, 192 Empeño Fácil units and 487 EZMONEY units.

In April, EZCORP acquired Cash Converters franchise rights in Canada and currently 24 out of the 65 company-owned stores are successfully operating under the Cash Converters brand.

EZCORP also plans to acquire a 60% stake of Mexico City-based short-term payroll deduction loan company Crediamigo for $58.7 million. The transaction is expected to close in second quarter of 2012.

Financial Position

The company ended the quarter with cash and cash equivalent of $22.9 million, down from $24.0 million in the fiscal year 2011. At the end of the first quarter, long-term debt, less current maturities, was $40.5 million and stockholders' equity was $698.4 million.

Outlook

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

Our Take

The company’s first quarter results were below expectations, but it continues to focus on cost control, 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 2012 and 2013 are pegged at $3.07 and $3.50, respectively.

The company has a Zacks #4 Rank, which translates into a short-term Sell 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) is slated to release its fourth quarter 2011 results on January 25, 2012.

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