Credit Acceptance Corporation (CACC - Free Report) reported second-quarter 2020 earnings of $5.40 per share, beating the Zacks Consensus Estimate of $4.65. The company recorded earnings of $8.68 per share in the prior-year quarter. Notably, the figure includes certain non-recurring items.
Increase in revenues and lower operating expenses supported results. Moreover, the balance sheet remained strong during the second quarter. However, a significant increase in provisions remained a major headwind.
Excluding non-recurring items, net income (non-GAAP basis) was $154.1 million or $8.63 per share, down from $162.9 million or $8.60 per share in the prior-year quarter.
GAAP Revenues Increase, Expenses Fall
Total revenues were $406.3 million, up 9.6% year over year. The increase was largely driven by a rise in finance charges. Also, the figure beat the Zacks Consensus Estimate of $372.7 million.
Operating expenses of $81.6 million declined slightly from the prior-year quarter. Lower general and administrative attributed to the fall.
As of Jun 30, 2020, net loans receivable amounted to $6.7 billion, up 2% from the prior quarter. Total assets were $7.3 billion as of the same date, which increased 1.1% sequentially. Also, total stockholders’ equity was $2 billion, up 5% from the prior quarter.
Credit Quality Deteriorates
Provision for credit losses surged substantially from the year-ago quarter to $139.4 million. The rise was mainly due to the adoption of CECL on Jan 1, 2020, and the impact of a reduction in expected future cash flows from its loan portfolio.
Allowance for credit losses at the second-quarter end was $3.4 billion, up significantly year over year.
Our Viewpoint
Credit Acceptance is well-poised for revenue growth, given the persistent rise in consumer loans. However, elevated expenses and deteriorating asset quality are key near-term concerns.
Currently, Credit Acceptance carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Consumer Loan Stocks
Capital One (COF - Free Report) reported second-quarter 2020 adjusted loss of $1.61 per share, wider than the Zacks Consensus Estimate of a loss of $1.25. The year-ago quarterly earnings were $3.37 per share.
Sallie Mae (SLM - Free Report) reported second-quarter 2020 loss per share of 22 cents (on core basis) as against earnings of 31 cents reported in the prior-year quarter. The Zacks Consensus Estimate was pegged at earnings of 6 cents.
Ally Financial’s (ALLY - Free Report) second-quarter 2020 adjusted earnings of 61 cents per share handily surpassed the Zacks Consensus Estimate of 18 cents. However, the figure declined from the year-ago reported figure of 97 cents per share.
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Credit Acceptance Corporation (CACC - Free Report) reported second-quarter 2020 earnings of $5.40 per share, beating the Zacks Consensus Estimate of $4.65. The company recorded earnings of $8.68 per share in the prior-year quarter. Notably, the figure includes certain non-recurring items.
Increase in revenues and lower operating expenses supported results. Moreover, the balance sheet remained strong during the second quarter. However, a significant increase in provisions remained a major headwind.
Excluding non-recurring items, net income (non-GAAP basis) was $154.1 million or $8.63 per share, down from $162.9 million or $8.60 per share in the prior-year quarter.
GAAP Revenues Increase, Expenses Fall
Total revenues were $406.3 million, up 9.6% year over year. The increase was largely driven by a rise in finance charges. Also, the figure beat the Zacks Consensus Estimate of $372.7 million.
Operating expenses of $81.6 million declined slightly from the prior-year quarter. Lower general and administrative attributed to the fall.
As of Jun 30, 2020, net loans receivable amounted to $6.7 billion, up 2% from the prior quarter. Total assets were $7.3 billion as of the same date, which increased 1.1% sequentially. Also, total stockholders’ equity was $2 billion, up 5% from the prior quarter.
Credit Quality Deteriorates
Provision for credit losses surged substantially from the year-ago quarter to $139.4 million. The rise was mainly due to the adoption of CECL on Jan 1, 2020, and the impact of a reduction in expected future cash flows from its loan portfolio.
Allowance for credit losses at the second-quarter end was $3.4 billion, up significantly year over year.
Our Viewpoint
Credit Acceptance is well-poised for revenue growth, given the persistent rise in consumer loans. However, elevated expenses and deteriorating asset quality are key near-term concerns.
Currently, Credit Acceptance carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Consumer Loan Stocks
Capital One (COF - Free Report) reported second-quarter 2020 adjusted loss of $1.61 per share, wider than the Zacks Consensus Estimate of a loss of $1.25. The year-ago quarterly earnings were $3.37 per share.
Sallie Mae (SLM - Free Report) reported second-quarter 2020 loss per share of 22 cents (on core basis) as against earnings of 31 cents reported in the prior-year quarter. The Zacks Consensus Estimate was pegged at earnings of 6 cents.
Ally Financial’s (ALLY - Free Report) second-quarter 2020 adjusted earnings of 61 cents per share handily surpassed the Zacks Consensus Estimate of 18 cents. However, the figure declined from the year-ago reported figure of 97 cents per share.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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