UPDATE: Piper Jaffray Raises Its PT & Estimates On Portfolio Recovery

Portfolio Recovery PRAA reported EPS of $1.20 vs. PJC of $1.15 and consensus of $1.12. The beat vs. Piper Jaffray's model was driven by higher cash collections. Purchases were also stronger than anticipated. A $3m investment in the legal collection business reduced earnings by $0.11 and impairments had a $0.19 impact. Piper's thesis of moderating impairments and expanding collection multiples which could lead to several years of strong earnings growth is continuing to play out, but is still in the early stages. Piper is raising its '11/'12 EPS estimates from $5.40/$6.28 to $5.50/$6.42 and it still feels it is conservative on several key drivers. Piper reiterates its Overweight rating and raises its price target from $86 to $103. Call center collections of $54m were especially strong in the typically seasonally weakest quarter, beating Piper's estimate of $48m. It attributes improved collection strategies and productivity as the primary drivers. Total revenue growth was 38%, as slower growth in fee businesses partially offset the growth of cash collections. Piper Jaffray maintains its thesis that PRAA should have an extended period expanding earnings and ROE as impairments from older pools purchased in more competitive environments moderate. It also believes lower balance sheet valuations for remaining receivables and accelerating cash collections could drive margin expansion. Piper has an OW rating on PRAA PRAA closed Tuesday at $79.10