Shares of Regional Management Corp. RM have lost 9.3% since it reported third-quarter 2024 results on Nov. 6, after the closing bell. Despite an earnings beat, investors might be concerned about the impact of Hurricane Helene and rising provision for credit losses on the company’s earnings. Higher interest and fee income and net financial receivables partially offset the negatives.
It reported third-quarter 2024 adjusted earnings per share (EPS) of $1.18, which beat the Zacks Consensus Estimate by 12.4%. The bottom line increased 29.7% year over year.
RM's total revenues climbed 3.9% year over year to $146.3 million. The top line missed the consensus mark by a whisker.
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Regional Management Corp. Price, Consensus and EPS Surprise
Regional Management Corp. Price, Consensus and EPS Surprise
Interest and fee income increased 7.1% year over year to $133.9 million, which beat the Zacks Consensus Estimate by 2.2%. Net insurance income of $7.4 million fell 34.8% in the third quarter and missed the consensus mark by 35.2%. Other income of $5 million grew 11.3% year over year and beat the consensus mark by 6%.
Provision for credit losses increased 6.7% year over year to $54.3 million.
Total general and administrative expenses rose 0.6% in the third quarter to $62.5 million due to occupancy, marketing and other costs. The efficiency ratio, which depicts the general and administrative expenses as a percentage of revenues, was at 42.7% in the third quarter, down from 44.1% a year ago. It was much lower than the Zacks Consensus Estimate of 44.1%. Interest expenses increased 14.2% year over year to $19.4 million in the quarter under review.
Regional Management recorded a net income of $7.7 million in the third quarter of 2024 compared with $8.8 million a year ago. The third-quarter hurricane activity in North Carolina impacted the results.
At the end of the third quarter, net finance receivables were $1.8 billion, up 3.9% from a year ago. While small loans rose 10.7% year over year to $524.8 million, large loans increased 1.7% year over year to $1.3 billion. It had 340 branches at the third-quarter end, with net finance receivables per branch at $5.4 million, up 6.1% year over year. This indicates rising efficiency in its branches.
The company recorded total loan originations of $426.2 million during the September quarter, which rose 0.3% year over year because of controlled growth from credit-tightening actions.
Financial Position (as of Sept. 30, 2024)
Regional Management exited the third quarter with total assets of $1.82 billion, which rose from $1.79 at 2023-end. The cash amount rose to $4.7 million from $4.5 million at 2023-end.
Net debt fell from $1.395 billion at 2023-end to $1.391 billion. Total liabilities of $1.47 billion at the third-quarter end were lower than $1.47 billion at 2023-end. Total shareholders’ equity rose from $322.3 million at 2023-end to $352.9 million.
Dividend Update
For the fourth quarter of 2024, Regional Management announced a dividend of 30 cents per share, which will be paid on Dec. 11 to shareholders of record as of Nov. 21, 2024.
Outlook
Regional Management expects to improve credit loss performance in 2025. It will boost investments in strategic initiatives and portfolio growth. The company expects to open seven new branch locations by the year-end and three more by the beginning of 2025.
Ending Net Finance Receivables are expected to grow in the range of $65-$70 million in the fourth quarter of 2024. It expects general and administrative expenses for the fourth quarter of 2024 to be around $65.5 million.
Total revenue yield is likely to increase 60 basis points sequentially in the fourth quarter. Net credit losses are likely to be around $50.5 million in the fourth quarter. Loan loss reserve rate is expected to decline to 10.5% in the fourth quarter.
RM foresees about 60-70 basis points sequential growth in total revenue yield for the fourth quarter of 2024. It anticipates the effective tax rate to be around 24.5% for the fourth quarter. The company expects a full-year 2024 net income around $40 million.
Zacks Rank
Regional Management currently has a Zacks Rank #3 (Hold). 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.
Aon plc AON reported third-quarter 2024 adjusted earnings of $2.72 per share, which beat the Zacks Consensus Estimate by 11%. The bottom line advanced 17% year over year. Total revenues of $3.72 billion improved 26% year over year. The top line beat the consensus mark by 0.5%. It consisted of organic revenue growth of 7% and a 19% revenue rise from acquisitions.
Revenues are expected to register mid-single-digit or higher organic growth for 2024 and beyond. The company anticipates the adjusted operating margin to expand in 2024.
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