Cash America Downgraded At Sterne Agee CRT On Poor Loan, Pawn Industry Growth

• Cash America International Inc CSH shares are up 29 percent year-to-date, rising steadily after slipping below the $20 mark in end-January.
• Sterne Agee CRT’s Henry J. Coffey Jr. downgraded the rating on the company from Buy to Neutral, while maintaining the price target at $30.
• US same-store pawn loan and pawn revenue growth is likely to continue to be modest to negative, Coffey mentioned.

Analyst Henry Coffey said that Cash America’s shares were trading within 2 percent of the price target.

Since September 2015, the state of the bigger picture economics, which includes gas prices, employment data and product intrusion, has resulted in US same-store pawn loan and pawn revenue growth among lenders being modest to negative, Coffey noted, while adding, “This trend is expected to continue.”

Cash America’s had approved a buyback plan of up to 4.0 million shares. By the end of the June quarter, the company had repurchased $57 million in stock and had 1.668 million shares remaining to repurchase.

“We are assuming that the company bought back ~900,00 shares in 3Q15 and repurchases the remaining shares open on their authorization in 4Q15,” the analyst wrote.

Cash America is scheduled to report its quarterly results on October 29. Coffey believes that the company’s operating results would meet the current guidance range of $0.17-$0.20 per share. Coffey projected a “relatively modest” decline of 2 percent in US domestic pawn shop revenue and continued operating efficiency gains.

“As the company concentrates its unsecured loan business in markets such as Ohio, loss rates and required provision should come down,” the Sterne Agee CRT report added.