Encore Capital Group, Inc. ECPG shares have lost 1.9% since it reported third-quarter 2024 results on Nov. 6, 2024. The quarterly earnings suffered from reduced portfolio purchases in the U.K. by Cabot and rising operating expenses. Improved purchasing in the United States and an optimistic outlook for this business in the future partially offset the negatives.
ECPG reported third-quarter 2024 adjusted earnings per share (EPS) of $1.26, which missed the Zacks Consensus Estimate by 14.3%. However, the bottom line reported an improvement of 59.5% year over year.
ECPG's revenues increased 18.6% year over year to $367.1 million. Also, the top line beat the consensus mark by 1.9%.
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Encore Capital Group Inc Price, Consensus and EPS Surprise
Encore Capital Group Inc price-consensus-eps-surprise-chart | Encore Capital Group Inc Quote
Operational Update
Total debt purchasing revenues improved 19.3% year over year in the quarter under review to $340.8 million. Servicing revenues grew 14.5% in the third quarter of 2024 to $22.8 million and beat the consensus mark by 3.5%.
Global collections grew 18% year over year to $550 million and beat the consensus mark by 5.4% thanks to strong portfolio purchasing in the United States in the past couple of years. In Europe, particularly in the U.K., portfolio purchasing remains competitive, leading to lower portfolio purchases. However, the company exited the secured NPL market in Spain, which impacted its third-quarter earnings.
Total operating expenses of $261 million rose 11.5% year over year due to increased salaries and employee benefits, cost of legal collections and other operating expenses. Cash efficiency margin (cash receipts minus operating expenses minus impairment charges divided by cash receipts) increased to 53.6% in the third quarter from 51% a year ago.
Interest expenses increased 32.3% year over year to $66.9 million in the quarter under review. Encore Capital’s net income of $30.6 million improved 58.5% year over year.
Global portfolio purchases of $282.5 million rose from $230.6 million a year ago. It deployed $230 million in the United States and the rest in Europe.
Financial Position (as of Sept. 30, 2024)
Encore Capital exited the third quarter with total assets of $5 billion, higher than $4.6 billion at 2023-end. Cash and cash equivalents amounted to $247.4 million in the third quarter, higher than $158.4 million at 2023-end.
Borrowings increased from $3.32 billion at 2023-end to $3.6 billion. Total liabilities of $3.95 billion at the third-quarter end were higher than $3.69 billion at 2023-end. Total equity increased from $936.5 million at 2023-end to $1 billion.
Net cash provided by operating activities increased 14.1% year over year in the first nine months of 2024 to $132.6 million.
2024 Guidance Revised
Management expects portfolio purchasing to surpass the 2023 figure of $1.1 billion in 2024 and exceed $1.25 billion. It expects collections to grow by around 15% to $2.125 billion in 2024.
Interest expenses were earlier expected to be $250 million for 2024 due to bond refinancing.
Zacks Rank
Encore Capital currently has a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Finance Sector Players
Marsh & McLennan Companies, Inc. MMC posted third-quarter 2024 adjusted earnings per share of $1.63, which beat the Zacks Consensus Estimate by 1.2%. The bottom line advanced 3.8% year over year. Consolidated revenues rose 6% year over year to $5.7 billion. The figure also improved 5% on an underlying basis. The top line, however, fell 0.2% short of the consensus mark.
Marsh & McLennan’s adjusted operating income was $1.19 billion in the third quarter, which grew 12% year over year but missed our estimate of $1.21 billion.
Arthur J. Gallagher & Co. AJG reported third-quarter 2024 adjusted net earnings of $2.26 per share, meeting the Zacks Consensus Estimate. The bottom line increased 13% on a year-over-year basis. Total adjusted revenues of $2.7 billion missed the Zacks Consensus Estimate by 0.1%. However, the top line improved 11.1% year over year.
EBITDAC grew 14.3% from the prior-year quarter to $808.8 million.
PRA Group, Inc.’s PRAA reported third-quarter 2024 earnings per share of 49 cents, which beat the Zacks Consensus Estimate by 44.1%. A loss of 31 cents per share was incurred in the prior-year quarter. Total revenues climbed 30.1% year over year to $281.5 million. The top line surpassed the consensus mark by 6.4%.
PRAA reported a net income of $27.2 million against a loss of $12.2 million in the prior-year quarter.
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