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Spotlight on Encore Capital's (ECPG) Q1 Earnings Drivers

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Encore Capital Group, Inc. (ECPG - Free Report) is set to report its first-quarter 2024 results on May 8, after the closing bell. It is expected to have witnessed increased top line and collections in the March quarter.

Earnings Surprise History

Encore Capital’s earnings beat the consensus estimate in one of the prior four quarters and missed thrice, with the average surprise being negative 17.9%. This is depicted in the graph below:

Encore Capital Group Inc Price and EPS Surprise

Encore Capital Group Inc Price and EPS Surprise

Encore Capital Group Inc price-eps-surprise | Encore Capital Group Inc Quote

In the last reported quarter, the international specialty finance company reported adjusted operating earnings per share of $1.25, beating the Zacks Consensus Estimate by 2.5% due to improving portfolio supply in the United States and rising collections. Continued growth in lending coupled with higher delinquencies and charge-offs supported the company’s record supply of non-performing loans in the quarter. However, slow growth in the U.K. and European markets partially offset the results.

Now, let’s see how things have shaped up prior to the first-quarter earnings announcement.

Q1 Factors to Note

The Zacks Consensus Estimate for first-quarter revenues from receivable portfolios is pegged at almost $310 million, signaling a 4.9% year-over-year growth. This is expected to have boosted its debt-purchasing revenues. Higher returns from its U.S. operations are likely to have aided ECPG’s top line.

The consensus estimate for first-quarter revenues of $329.2 million indicates a 5.3% increase from the year-ago reported figure. Growing credit card lending and charge-offs are likely to have bolstered the U.S. portfolio supply. This is expected to have benefited its portfolio pricing and returns.

The company is expected to benefit from higher global collections, driven by the normalization of consumer behavior and a stable collections environment. The Zacks Consensus Estimate for first-quarter global collections is pegged at $495.8 million, indicating 7.2% year-over-year growth.

However, the company is expected to have encountered higher operating expenses in the quarter due to increased salaries and employee benefits, cost of legal collections, collection agency commissions and other operating expenses, partially offsetting the upside and making an earnings beat uncertain.

The Zacks Consensus Estimate for first-quarter earnings per share is pegged at 94 cents, in line with the prior-year level. The estimate remained stable over the past week.

Moreover, the Zacks Consensus Estimate for first-quarter Servicing revenues suggests a 2.6% decrease compared to the previous year. The competitive landscape in the portfolio purchasing market in Europe may have presented limited growth opportunities for the company. Consequently, ECPG might have redirected capital toward the U.S. market.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Encore Capital this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.

Earnings ESP: The company currently has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate currently stands at an earnings of 94 cents per share, in line with the Zacks Consensus Estimate.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Encore Capital currently carries a Zacks Rank #3.

You can see the complete list of today’s Zacks #1 Rank stocks here.

How Other Stocks Performed

Here are some companies from the broader Finance space that have already reported earnings for the March quarter: Virtu Financial, Inc. (VIRT - Free Report) , American Express Company (AXP - Free Report) and Euronet Worldwide, Inc. (EEFT - Free Report) .

Virtu Financial reported first-quarter 2024 adjusted earnings per share of 76 cents, which outpaced the Zacks Consensus Estimate by 28.8% on the back of substantial growth in interest and dividends income coupled with strong revenue contribution from the Market Making segment. However, the upside was partly offset by a decline in net trading income and an elevated overall expense level.

American Express reported first-quarter 2024 earnings per share of $3.33, which beat the Zacks Consensus Estimate by 12.1% thanks to improved net interest income and growth in the customer base of Millennials and Gen-Z, driving growth in the U.S. Consumer Services Billed business. The results were partially offset by escalating customer engagement and compensation expenses.

Euronet reported first-quarter adjusted earnings of $1.28 per share, which surpassed the Zacks Consensus Estimate by 28% due to strong contributions from the EFT Processing, epay and Money Transfer segments. Solid growth in cross-border transactions and sustained demand for digital products aided performance. However, the upside was partly offset by a higher level of operating costs.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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