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Analyst Blog

Encore Capital Group Inc. (ECPG - Snapshot Report), delivered first quarter 2013 operating earnings of 86 cents per share which exceeded the Zacks Consensus Estimate of 80 cents per share. Results also improved 23% year over year from 70 cents in the first quarter of 2012.

Including convertible notes non-cash interest and issuance cost amortization of 3 cents, and acquisition related expenses of 3 cents, Encore Capital reported net income of 80 cents per share, up 81.8% year over year.

Quarterly Operational Update

Total revenue of Encore Capital increased 14.1% year over year to $144.3 million in the first quarter. The upside was attributable to an 11% increase in revenue from receivable portfolios in portfolio purchasing and recovering business, net of allowance adjustments. However, results lagged the Zacks Consensus Estimate of $150 million.

Gross collections from the portfolio purchasing and recovery business were $270.2 million, up 17% year over year.

Total operating expenses of Encore Capital increased 15.8% year over year to $105.9 million from $91.4 million in the year-ago quarter. Higher salaries and employee benefits, cost of legal collections and other operating expenses mainly led to increase in expenses.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA), increased 21% year over year to $174.5 million in the quarter under review.

Financial Update

Encore Capital exited the quarter with cash and cash equivalents of $29.9 million, up 70.8% from $17.5 million at Dec 31, 2012.

Debt decreased 8.5% to $646 million at Mar 31, 2013 from $706 million at year end 2012. Consequently debt-to-capital ratio of Encore Capital as of Mar 31, 2013 stood at 60.2%, representing an improvement of 330 basis points from 63.5% at Dec 31, 2012.

Net cash from operating activities in the first quarter of 2013 was $23.7 million, down 12.6% year over year.

Purchase of property and equipment increased to $2.3 million in the first quarter of 2013 from $1.6 million in the year-ago period.

Other Company Releases

Discover Financial Services (DFS - Analyst Report) reported first-quarter 2013 earnings per share (EPS) of $1.33, surpassing the Zacks Consensus Estimate of $1.12.

SLM Corp. (SLM - Analyst Report) – commonly known as Sallie Mae – reported its first-quarter 2013 core earnings of 61 cents per share, slightly ahead of the Zacks Consensus Estimate of 59 cents.

Capital One Financial Corp.’s (COF - Analyst Report) first-quarter 2013 operating earnings of $1.92 per share substantially surpassed the Zacks Consensus Estimate of $1.63.

Zacks Rank

Encore Capital currently carries a Zacks Rank #2 (Buy).

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