An old Fav, Metris (MTX) Get short!: First Union's Whitney on Metris Profit Report: Earnings Comment
7/20/99 13:8
First Union's Whitney on Metris Profit Report: Earnings Comment
St. Louis Park, Minnesota, July 20 (Bloomberg) -- Meredith
Whitney, an analyst at First Union Capital Markets, comments on
Metris Cos.' second-quarter earnings, which rose 130 percent and
beat analysts' expectations. Income from operations, before a
charge of $152.4 million for the conversion of preferred stock by
an investor, rose to $28.5 million, or 54 cents a share, from net
income of $12.4 million, or 31 cents, in the year-ago period.
Earnings beat the average analysts' forecast of 45 cents a share,
according to First Call Corp.
Whitney, who has a ''hold'' rating on the stock, said she
was disappointed with several of the underlying numbers in the
credit-card marketer's earnings report.
''Non-interest income, or income from fees, and the net
interest margin fell on a sequential basis and that was
disappointing,'' Whitney said. ''Also, the provision for losses
came down and operating expenses were up.''
''It was not a clean quarter so the general momentum in the
stock is not what was expected,'' she said. ''Metris' exposure is
100 percent to sub-prime. They have the least amount of
diversification, and they're in the riskiest business of any
credit-card issuer. You have to have a very compelling reward
ratio for taking on that risk'' as an investor, Whitney said.
''They also stated they probably will not make any more
portfolio acquisitions this year. They've gotten a lot of kick
this year out of acquisitions. Without acquisitions, it will be
difficult to see huge upside in profitability,'' said Whitney.
She said non-interest income fell from the last quarter
because Metris didn't get as much business as expected from
agreements to sell credit insurance, travel club memberships and
other related products to cardholders at other big credit-card
issuers, including Citigroup Inc., Household International Inc.,
and Bank One Corp.
''There should be a lot more upside than happened this
quarter because they led people to believe these would be big
money makers,'' Whitney said.
--Adam Rombel in the New York newsroom (212) 893-3375" |
