Janney Upgrades First Cash Financial (NASDAQ:FCFS) To A Buy

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Analysts at Janney have demonstrated their faith in the future of First Cash Financial Services Inc (NASDAQ:FCFS), upgrading their rating on the stock to Buy from Neutral in their latest note on the company. The development follows First Cash’s fourth quarter results that would have been strong had it not been for adverse forex impact. The analysts are of the view that there is demand for First Cash’s products and services and that the company is poised to deliver better results going forward.

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4Q earnings highlight

First Cash reported adjusted EPS of $0.73 last quarter. That compared with the consensus estimate of $0.76. The results in the quarter were largely hampered by a stronger U.S. dollar versus a weaker Mexican currency.

2016 guidance

For 2016, First Cash is looking for EPS in the band of $2.20 to $2.40. That’s short of Janney’s estimated EPS of $2.78 and the consensus estimate of $2.70. Once again though, Janney is of the opinion that the adverse forex environment was the greatest impediment for the firm. As such, First Cash still acknowledges that forex will remain a headwind in the near-term, but should ease with time.

Nevertheless, Janney doesn’t believe that the forex issue is a serious challenge that should keep anyone on the sidelines. That explains why the firm also boosted its fair value estimate for the stock for the next 12 months to $45 from $44. Janney’s fair value estimate signals more than 50% upside potential from the prevailing stock price.

Citing the near-term impact of adverse forex fluctuation, Janney has trimmed its 2016 EPS estimate for First Cash to $2.36 from $2.78. The firm has also introduced 2017 EPS estimate of $2.83.

First Cash recently invested $45 million to acquire hundreds of pawn stores in Guatemala, El Salvador and Mexico and the assets are expected to contribute to growth this year.

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