DFC Global (DLLR) in a World of Hurt

Jacob Harper |

International pawnbroker and lender DFC Global (DLLR) , a provider of financial services to typically low-income and disenfranchised customers, saw shares drop precipitously on Jan. 31 following the issuance of a terrible 2014 fiscal second quarter earnings report. Several analyst downgrades in the wake of the dismal report added insult to injury, sending DFC’s stock into a tailspin.

According to their website, DFC provides “short-term consumer loans, secured pawn loans, check cashing and gold-buying services,” almost exclusively to the “unbanked and under-banked” sector of the populace. DFC has been hit hard by government regulators, notably in the UK, who have targeted companies like DFC for engaging in usury and other ethically dubious lending practices.

In a conference call with investors, CEO Jeff Weiss also attributed the companies’ earnings miss to the lowered commodity prices for gold and the increasing value of the Canadian dollar.

For their fourth quarter 2013 earnings report, DFC reported a net gain of $2.3 million or $0.04 per share, versus the net profit of $19.7 million, or $0.56 per share, from the same period a year ago. Revenue for the quarter was $262.3 million, as compared to $292.9 million from the same quarter the previous year. Analysts were expecting a profit of $0.19 per share on revenues of $272.08 million.

DFC also ratcheted down guidance considerably, lowering projected EBITDA for fiscal year 2104 to the $170 million to $200 million range, down from $200 million to $240 million.

Immediately following the significant earnings miss, the lender was hit by a major downgrades from an industry expert. Nomura Securities lowered DFC’s shares to neutral and slashed their price target from $16.00 to $8.00 a share.   

DFC’s shares plummeted on the earnings and revenue shortfall and lowered guidance. The lender’s shares dropped 25.78 percent by midday to hit $7.85 a share.


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