On Nov 19, we upgraded DFC Global Corp. (DLLR) to Neutral from Underperform given its continued efforts to ramp up its operational results, particularly in loan origination growth that has suffered due to introduction of 3 loan rollovers per customer. This miscellaneous financial service provider currently carries a Zacks Rank #3 (Hold).
Why the Upgrade?
DFC Global is focused on its plan to boost loan origination growth, which was hampered due to new loan rollover limitations. A restriction of three loan rollovers per customer and stringent lending-underwriting norms, loan growth in UK was considerably affected. DFC Global intends to increase awareness in the U.K. over the next several months so as to influence loan origination growth.
Additionally, DFC Global expects to incur expenses in the range of $10.0 million – $15.0 million to support ongoing regulatory-related activities, including regulatory advisory costs, legal opinions and analysis, and audit and regulatory compliance costs in fiscal 2014.
Nevertheless, ongoing cost savings from the business’ restructuring is expected to somewhat limit the adverse impact. The restructuring efforts will also eventually lower operating cost going forward.
DFC Global has been diversifying across geographies, besides engaging in product diversification. It has completed several acquisitions consistent with its objective to expand and diversify its core retail financial services business in Canada, the UK and the U.S. The company has radically expanded its online presence and gained scalable technological platforms in several markets, the United Kingdom and Finland in particular.
DFC Global remains committed to return value to its shareholders. With 1 million shares bought back in the first quarter of fiscal 2014, the company has exhausted its 5.0 million shares repurchase authorization. It is now authorized to buy back approximately 4.5 million additional shares under its newly authorized share repurchase plan.
With respect to earnings performance, DFC Global reported operating net earnings of 21 cents per share for the fiscal first-quarter 2014 (ending Sep 30, 2013) that missed the Zacks Consensus Estimate of 26 cents per share. Results also plunged 61% year over year. As a result, the Zacks Consensus Estimate for fiscal 2014 moved south by 21% to 89 cents as 3 of 4 estimates were lowered over the last 30 days. The same for fiscal 2015 also declined by 17% as all 4 estimates moved down over the same time frame.
Other Stocks to Consider
Better-ranked stocks in the same industry include Euronet Worldwide Inc. (EEFT), FleetCor Technologies, Inc. (FLT) and American Express Company (AXP). While Euronet Worldwide and FleetCor Technologies carry a Zacks Rank #1 (Strong Buy), American Express carries Zacks Rank #2 (Buy).
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