A popular short bet is likely paying off for some hedge funds.
Yesterday, World Acceptance Corp released their fiscal first quarter earnings that showed core earnings per share come in at $2.44, on revenue of $137.2 million. Wall Street consensus was core earnings per share of $2.56, on revenue of $142.5 million. BMO Capital Markets analysts had core earnings per share estimates of $2.61 for the quarter. Shares of World Acceptance Corp. dove -11.31% by the time the closing bell sounded on Wednesday. Today, BMO Capital Markets revised and updated their equity research stance on the company. While analysts left World Acceptance Corp at a “market perform” rating, analysts cut their price target from $83 to $48, implying a return of -7% from current price of $51.37.
Third Point's Dan Loeb discusses their new positions in a letter to investor reviewed by ValueWalk. Stay tuned for more coverage. Loeb notes some new purchases as follows: Third Point’s investment in Grab is an excellent example of our ability to “lifecycle invest” by being a thought and financial partner from growth capital stages to Read More
BMO lowers 2016 and 2017 full year earnings estimates
Aside from the target price cut, BMO analysts revised earnings estimates for 2016 and 2017 lower. BMO Capital Markets now estimates that World Acceptance Corp will see full year earnings per share of $10.50 in 2016, down from $11.45 or -8%. In 2017, BMO sees earnings come in at $8.97 for full year, down from $12.34 or -27%. BMO analyst, James Fotheringham says that the reasoning for the bearish views on World Acceptance has to do with the perceived idea that World Acceptance will not open any share repurchasing programs and significant growth challenges in the consumer credit industry. Additionally, World Acceptance still has regulatory issues from March 2014 with the CFPB to resolve, which could further result in heavy fines.
FBR & Co. slash estimates for World Acceptance
Aside from BMO Capital Market’s downgrade and earnings revision, FBR & Co. also released an updated research report today on World Acceptance. While FBR & Co. maintained their “market perform” rating, they slashed price target from $64 to $55, is roughly 7% above today’s price. FBR & Co. had just recently downgraded World Acceptance roughly a month ago, on June 25th. Around that time, World Acceptance was still trading around $66.73 and FBR & Co. slashed rating from “outperform” to “market perform” and cut price target from $98 to $73. Essentially, in the last month, price target has dropped from $98 to $55 at FBR & Co., representing a -78% reduction in just one month.
Overall, World Acceptance Corp is getting no love from Wall Street. Analysts are extremely bearish on the consumer finance company and their outlook continues to reflect that bearish sentiment. Additionally, with CEO and a SVP leaving the company, further uncertainty sets in, as a successor must be named. Overall, World Acceptance Corp. looks to have a rough patch ahead.