Encore Capital Group Inc

Encore Capital Group raised its full-year 2026 outlook, now expecting portfolio purchases of $1.40-$1.50 billion, collections of $2.80-$2.85 billion, and GAAP EPS of $13.00-$14.00, including a $1 per share impact from refinancing costs. The guidance came as the company's shares have soared 73.8% so far in 2026, against a 16.2% decline for its industry and a 17.2% gain for the S&P 500, outpacing peers Credit Acceptance Corporation, up 19.7%, and PRA Group, up 10.2%. In the first half of 2026, U.S. receivable portfolio purchases reached $688.1 million out of $806.7 million in global purchases, while global collections hit a record $1.46 billion and estimated remaining collections rose 9% year over year to $10.18 billion as of June 30, 2026. In May, the company refinanced approximately $1 billion of debt through two lower-coupon bonds, a move expected to save about $15 million annually, and leverage stood at 2.3x as of June 30, 2026, down from 2.6x a year earlier. The Zacks Consensus Estimate projects earnings per share rising from $10.91 in 2025 to $13.52 in 2026 and $14.64 in 2027, though risks include U.S. concentration, with Midland Credit Management accounting for 85.3% of global portfolio purchasing dollars in the first half, and legal collections expenses that rose 25.8% year over year.

Encore Capital Group reported record global collections of $737 million in the second quarter of 2026, a 13% increase from a year earlier, and raised its full-year earnings per share guidance to between $13 and $14. Global portfolio purchases reached $444 million, including a record $372 million in the US, while average receivable portfolios grew 11% to $4.52 billion. GAAP net income was $64 million, or $2.81 per share, weighed down by $30.5 million in refinancing costs that reduced EPS by $1.00. The company improved its leverage ratio to 2.3 times from 2.6 times a year ago and lifted its cash efficiency margin by 2.9 percentage points to 60.2%. For the full year, Encore expects global portfolio purchases of $1.4 billion to $1.5 billion and global collections of $2.8 billion to $2.85 billion.

Encore Capital Group announced it will redeem all $230.0 million aggregate principal amount of its 4.00% Convertible Senior Notes due 2029 on September 24, 2026. The redemption was triggered because the company's common stock price exceeded 130% of the conversion price for the required number of trading days. Holders may convert their notes at any time before 5:00 p.m. New York City time on September 22, 2026, and conversions during this make-whole period will receive an increased conversion rate of 16.2056 shares per $1,000 principal amount, equivalent to a conversion price of approximately $61.71 per share. The company also expects to unwind and terminate the capped call transactions entered into when the notes were issued, which could result in cash or share payments to Encore and may affect the market price of its common stock.

Encore Capital Group shares have surged 58.1% year to date, driven by record first-quarter 2026 collections of $718.4 million, up 19% year over year, and favorable U.S. debt-purchasing conditions. Its U.S. business, MCM, generated $556 million of those collections, a 23% increase, prompting management to raise the 2026 global collections outlook to nearly $2.8 billion, representing 8% growth, while keeping global portfolio purchase guidance at $1.4 to $1.5 billion. The Zacks Consensus Estimate projects sales growth of 5.5% for 2026 and 2.7% for 2027. However, the company faces concentration risk from its European unit Cabot, which is pressured by subdued lending and strong competition, and carries $4.03 billion in borrowings that leave earnings sensitive to funding costs. ECPG currently holds a Zacks Rank of 1, or Strong Buy, with a Value Score of B, while peers PRA Group and FirstCash Holdings carry a Zacks Rank of 3, or Hold.

Sixth Street Specialty Lending reported first-quarter revenues of $93.4 million, down 19.7% year on year and missing analyst estimates by 9.3%, making it the weakest performer among nine tracked specialty finance stocks. The group overall beat revenue consensus by 2.1% but saw average share prices decline 1.5% since reporting. Encore Capital Group led with revenues of $475.4 million, up 21% and beating estimates by 6.5%, while HA Sustainable Infrastructure Capital posted the fastest revenue growth at 31.3% and the largest beat at 43.8%. PROG Holdings met revenue expectations with $742.7 million, up 11.1%, and raised full-year EPS guidance above estimates, sending its stock up 34.3%. Sixth Street Specialty Lending's stock fell 16.9% since its report, the steepest decline among peers.

Zacks Equity Research has identified Credit Acceptance Corp., Enova International, Inc., and Encore Capital Group, Inc. as three consumer loan stocks poised to benefit from improving industry dynamics. The Zacks Consumer Loans industry, a 12-stock group within the broader Zacks Finance sector, currently carries a Zacks Industry Rank of 30, placing it in the top 12% of more than 245 Zacks industries. Higher interest rates and easing lending standards are brightening the outlook, with the industry's earnings estimates for 2026 and 2027 revised upward by 2.9% and 9.6%, respectively, over the past year. The industry has collectively soared 67.6% over the past two years, outperforming the Zacks S&P 500 composite and its sector. Credit Acceptance, with a market cap of $6.1 billion, has seen its shares jump 25.8% over the past six months and is expected to grow earnings by 20.1% in 2026 and 13.7% in 2027. Enova International, a financial technology company with a market cap of $5 billion, has gained 24.1% over the same period and is projected to increase earnings by 26.8% in 2026 and 23.7% in 2027. Encore Capital Group, a debt recovery firm with a market cap of $1.8 billion, has soared 52.4% over the past six months and is expected to see earnings rise 19.3% in 2026 and 6.5% in 2027.