On Thursday, TD Cowen adjusted its outlook on First Cash Financial (NASDAQ:FCFS), reducing the company's stock price target to $140 from $145 while sustaining a Buy rating on the stock.
The adjustment followed the company's recent earnings report, which surpassed the firm's expectations mainly due to robust revenue figures from its U.S. pawn operations and, to a lesser extent, from its affiliate financial services (AFF). This performance helped to counterbalance a slight decline in the pawn operations in Latin America.
Despite outperforming TD Cowen's estimates, First Cash Financial did not meet the consensus revenue forecast. The shortfall was attributed primarily to retail merchandise sales, which the firm suggests were set too high by the consensus before the earnings were released. However, the company did exceed consensus expectations in other revenue areas.
TD Cowen highlighted that operating expenses and depreciation and amortization costs came in below their projections, contributing to the earnings beat. Conversely, the cost of retail merchandise sold was higher than expected, predominantly on the U.S. side, where the gross margin on retail sales fell short of the firm's estimates.
In response to the earnings results, TD Cowen has revised its earnings per share (EPS) predictions for First Cash Financial for the years 2024 and 2025 to $7.06 and $8.11, respectively, down from the previous forecasts of $7.19 and $8.38. The new price target of $140 is based on a multiple of 17 times the firm's 2025 EPS estimate.
InvestingPro Insights
As we delve into the financial health and stock performance of First Cash Financial (NASDAQ:FCFS), it's clear that the company has shown a pattern of financial reliability and growth that investors may find appealing. With a solid market capitalization of $5.22 billion, First Cash Financial presents itself as a substantial player in its sector.
The company's ability to maintain and raise dividends over the years—having increased its dividend for 8 consecutive years and maintained payments for 9 consecutive years—speaks to its commitment to shareholder returns and financial stability.
Recent performance metrics are also encouraging. First Cash Financial has had a strong return over the last three months, with a 15.11% price total return, and an even more impressive 30.98% over the past six months. This trend is a testament to the company's market resilience and the positive reception of its operational strategies.
With analysts predicting profitability for the current year and a track record of profitability over the last twelve months, the company's financials reflect a robust business model. Furthermore, the company's liquid assets exceed its short-term obligations, indicating a healthy liquidity position that can support ongoing operations and strategic initiatives.
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