Magazine article American Banker

Mercury Finance off on Report That Volume Was Flat in 1st Quarter

Magazine article American Banker

Mercury Finance off on Report That Volume Was Flat in 1st Quarter

Article excerpt

A 12% dip in the price of Mercury Finance Co. shares Tuesday highlighted a fissure among analysts covering the subprime automobile loan industry.

Flexible accounting rules and a risky customer base have caused analysts to offer widely disparate views on companies like Mercury, based in Lake Forest, Ill., and Eagle Finance Corp. of Gurnee, Ill.

Mercury's stock fell $1.625 a share Tuesday, to close at $12 on volume of 3.2 million shares. Wednesday, nearly 1.5 million shares were traded, as the stock gained 12.5 cents. Average daily volume has been about 450,000 shares.

Fueling investor concern, the company reported that first-quarter loan volume was flat compared with the fourth quarter of 1995. For some, this overshadowed the 29% rise in net income from the year-earlier quarter, to $32.3 million.

Joseph Jolson, an analyst at San Francisco-based Montgomery Securities, said the deceleration in loan growth during the past year is troubling.

Mr. Jolson predicted sales volume would pick up in the second quarter, and he boosted his 1996 earnings estimate for Mercury to 80 cents a share, from 78 cents, in light of the first-quarter results.

The selloff prompted Michael Durante of Cleveland-based McDonald & Co. to upgrade the shares to an"aggressive buy."

"The sharp selloff has been triggered by an incredible overreaction to Mercury's first-quarter earnings report," he wrote.

The flat loan growth did prompt at least one analyst to reduce his earnings estimate. Joseph LaManna of William Blair & Co. cut his 1996 estimate to 81 cents a share, from 83 cents. …

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