Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

On Apr 5, we downgraded our recommendation on DFC Global Corp. (DLLR - Analyst Report) to Underperform from Neutral, following the announcement of a lowered fiscal 2013 guidance. The Zacks Rank #5 (Strong Sell) company expects to report lower fiscal third-quarter earnings compared with the year-ago level.

Why the downgrade?

Following the news release, DFC Global witnessed sharp downward estimate revisions. All 4 estimates for 2013 as well as for 2014 moved south. While the Zacks Consensus Estimate for 2013 slumped 29% to $1.71 over the last 7 days, the same for 2014 dropped 30% to $2.00 over the same period.

Cause for Concern

DFC Global trimmed the fiscal 2013 earnings expectation to $1.70 to $1.80 per share from $2.35 to $2.45 per share guided earlier. Additionally, in the prelim result, DFC Global revealed that it expects operating earnings between 20–24 cents for the third quarter of fiscal 2013.

Moreover, the third-quarter prelim result of DFC Global is substantially lower from 53 cents earned in the year-ago quarter. The Zacks Consensus Estimate is at 22 cents, representing a year-over-year decline of 59.4%.

Management also stated that due to new loan rollover limitations (three loan rollovers per customer) several outstanding short-term consumer loans in the United Kingdom became immediately due, resulting in a temporary ‘credit crunch’ for the customers. As a result, the company is facing more loan defaults in its UK business, which in turn weighs on the earnings. In anticipation of the increasing number of loan defaults, DFC Global constricted the lending-underwriting norms, which again is weighing on loan growth in UK.

In addition, with increasing penetration of electronic banking services into the check cashing and money transfer industry, fees associated with check cashing has declined significantly over the years.

Also, DFC Global’s operating expenses have been increasing over the last few years, attributable to higher salaries and benefits, provision for loans losses, occupancy costs, and cost of gold purchased. The rise in expenses has restricted operating margin expansion.  If expenses continue to accelerate, operating margin expansion will be hugely affected going forward.

Financial Services Providers That Warrant a Look

Among other financial service companies, Euronet Worldwide Inc. (EEFT - Snapshot Report) , Moody's Corp. (MCO - Analyst Report) and SS&C Technologies Holdings, Inc. (SSNC - Snapshot Report) carry a favorable Zacks Rank #1 (Strong Buy) and appear impressive.
 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
BITAUTO HOLD BITA 35.33 +14.82%
ANI PHARMACE ANIP 24.79 +14.66%
E HOUSECHINA EJ 10.99 +9.24%
CANADIAN SOL CSIQ 26.97 +7.15%
INTERNATIONA ICAGY 33.30 +5.38%