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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.