Brace yourselves, investors -- EZCORP's (EZPW 1.06%) stock is about to soar after it announces earnings after the market closes on Tuesday. The reason is simple: Low expectations make it easier to surprise the market.
EZCORP, the Texas-based provider of pawn shops and other "instant cash solutions," has had some market trouble this past year, especially after lowering its guidance for the year with its most recent earnings release in November. However, I think these lower expectations will make it easier for the company to bounce back after earnings this time around.
Analysts are expecting $0.58 per share in earnings, as well as $266.8 million in revenues for this quarter. Analysts' EPS view is right in line with the company's own expectations. Meeting these expectations should give the company a nice bump and a strong start to its fiscal year.
What could go wrong
There is at least one thing that could derail this expected outcome. The company has been acquisition-crazy over the past year, buying up small pawn shop operators in the United States , Mexico , and the United Kingdom over the past year. If the integration and performance of these acquisitions isn't going as hoped, we could see EZCORP report less than stellar earnings, and instead plummet. Of course with the company currently sporting a trailing price-to-earnings multiple of 7.3, it might make it an even more attractive option considering its growing international footprint.
What I think
I'll be paying close attention after the market closes tonight to see which direction EZCORP will head when the market reopens on Wednesday. I think its low expectations will make it easier for the company to soar in the morning, but I could be wrong. Check back tomorrow morning for my detailed take on its earnings release.
