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Why DFC Global is Plunging 23 Percent Friday (DLLR)

Graph With Stacks Of CoinsShares of DFC Global (NASDAQ: DLLR) are plunging more than 23 percent after announcing disappointing earnings.

The company reported fiscal fourth-quarter EPS of $0.49 versus the estimated $0.47, beating by $0.02. Revenue came in at $269.10 million versus analyst consensus of $285.18 million.

As a result of the revenue miss, the stock has already received three downgrades Friday morning. Jefferies maintained its “Hold” on the stock but lowered its price target from $13 to $11.

William Blair downgraded the stock from “Outperform” to “Market Perform,” and JMP securities downgraded the stock from “Market Outperform” to “Market Perform” and removed the $19 price target.

DFC Global said,

“Fiscal 2013 presented our Company with a number of unique challenges, particularly in the United Kingdom,” said Jeff Weiss, the Company’s Chairman and Chief Executive Officer. “The Company’s retail and internet businesses have recently transitioned to more restrictive regulatory requirements in the United Kingdom. The new requirements provide guidance principally with respect to loan disclosures, loan affordability assessments, loan extension limitations, and collection practices.”

“The industry association shift to a three loan roll-over limitation, which we believe is more restrictive than the current policies of many of our competitors, is causing many of the outstanding short-term consumer loans in the United Kingdom to become due. Consequently, we have experienced higher loan defaults in our U.K. business during the second half of the fiscal year.”

“Accordingly, the Company tightened its underwriting criteria which resulted in decreased loan originations in fiscal 2013 in the United Kingdom and, while the transition to the new regulatory guidelines proceeds, we expect to maintain lower loan originations at least through the first half of fiscal 2014 in order to reduce the risk of higher loan defaults during this period.”

[stock-tools exchange="NASDAQ" symbol="DLLR" image_height="230" image_width="350"]

Disclosure: At the time of this writing, the author had no position in the company mentioned.

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