Credit Acceptance Corporation (CACC - Free Report) delivered a positive earnings surprise of 11.8% in fourth-quarter 2018. Adjusted earnings of $7.85 per share handily outpaced the Zacks Consensus Estimate of $7.02. Also, the bottom line compared favorably with $5.16 reported a year ago. Both earnings figures include certain non-recurring items.
Increase in revenues along with lower provisions supported the results. Also, the balance sheet remained strong during the fourth quarter. However, an increase in expenses posed a headwind.
After considering certain adjustments, net income was $151.9 million or $7.79 per share, down from $177.1 million or $9.10 per share in the prior-year quarter.
For full-year 2018, the company reported net income of $574 million or $29.39 per share, up from $470.2 million or $24.04 per share.
Revenues Improve, Expenses Rise
Total revenues in the reported quarter were $342.8 million, up 19.3% year over year. The increase was attributable to rise in all three components of revenues. Also, the reported figure beat the Zacks Consensus Estimate of $324.3 million.
For full-year 2018, the company reported revenues of $1.29 billion, up 15.8% on a year-over-year basis. Also, the figure topped the consensus estimate of $1.23 billion.
Operating expenses of $75.3 million rose 13.6% from the year-ago quarter. The rise was due to an increase in salaries and wages, general expenses and sales and marketing expenses.
Credit Quality: A Mixed Bag
Provision for credit losses decreased 28.9% year over year to $17.7 million. However, allowance for credit losses at the end of the reported quarter was $461.9 million, up from $429.4 million as of Dec 31, 2017.
Strong Balance Sheet
As of Dec 31, 2018, net loans receivable amounted to $6.2 billion, increasing from $5 billion as of Dec 31, 2017.
Total assets were $6.2 billion as of the same date, increasing from $5 billion on Dec 31, 2017. Also, total stockholders’ equity was $2 billion, up from $1.5 billion as of the end of December 2017.
Our Take
Credit Acceptance is well poised for growth in revenues given the continued rise in consumer loans. Furthermore, backed by a solid capital position, the company is expected to enhance shareholder value through continued share repurchases. However, increasing expenses might hurt bottom-line growth to some extent. Moreover, use of high debt remains a matter of concern.
Credit Acceptance Corporation Price, Consensus and EPS Surprise
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 Finance Companies
Capital One (COF - Free Report) reported fourth-quarter 2018 adjusted earnings of $1.87 per share that lagged the Zacks Consensus Estimate of $2.40. However, it compared favorably with the year-ago quarter’s adjusted earnings of $1.62.
Sallie Mae (SLM - Free Report) reported fourth-quarter 2018 core earnings of 31 cents per share, which surpassed the Zacks Consensus Estimate of 27 cents. Moreover, the figure compares favorably with 10 cents in the prior-year quarter.
Texas Capital Bancshares Inc. (TCBI - Free Report) reported negative earnings surprise of 13.8% in fourth-quarter 2018. Earnings per share of $1.38 lagged the Zacks Consensus Estimate of $1.60. However, the bottom line compares favorably with 84 cents recorded in the prior-year quarter.
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Credit Acceptance Corporation (CACC - Free Report) delivered a positive earnings surprise of 11.8% in fourth-quarter 2018. Adjusted earnings of $7.85 per share handily outpaced the Zacks Consensus Estimate of $7.02. Also, the bottom line compared favorably with $5.16 reported a year ago. Both earnings figures include certain non-recurring items.
Increase in revenues along with lower provisions supported the results. Also, the balance sheet remained strong during the fourth quarter. However, an increase in expenses posed a headwind.
After considering certain adjustments, net income was $151.9 million or $7.79 per share, down from $177.1 million or $9.10 per share in the prior-year quarter.
For full-year 2018, the company reported net income of $574 million or $29.39 per share, up from $470.2 million or $24.04 per share.
Revenues Improve, Expenses Rise
Total revenues in the reported quarter were $342.8 million, up 19.3% year over year. The increase was attributable to rise in all three components of revenues. Also, the reported figure beat the Zacks Consensus Estimate of $324.3 million.
For full-year 2018, the company reported revenues of $1.29 billion, up 15.8% on a year-over-year basis. Also, the figure topped the consensus estimate of $1.23 billion.
Operating expenses of $75.3 million rose 13.6% from the year-ago quarter. The rise was due to an increase in salaries and wages, general expenses and sales and marketing expenses.
Credit Quality: A Mixed Bag
Provision for credit losses decreased 28.9% year over year to $17.7 million. However, allowance for credit losses at the end of the reported quarter was $461.9 million, up from $429.4 million as of Dec 31, 2017.
Strong Balance Sheet
As of Dec 31, 2018, net loans receivable amounted to $6.2 billion, increasing from $5 billion as of Dec 31, 2017.
Total assets were $6.2 billion as of the same date, increasing from $5 billion on Dec 31, 2017. Also, total stockholders’ equity was $2 billion, up from $1.5 billion as of the end of December 2017.
Our Take
Credit Acceptance is well poised for growth in revenues given the continued rise in consumer loans. Furthermore, backed by a solid capital position, the company is expected to enhance shareholder value through continued share repurchases. However, increasing expenses might hurt bottom-line growth to some extent. Moreover, use of high debt remains a matter of concern.
Credit Acceptance Corporation Price, Consensus and EPS Surprise
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 Finance Companies
Capital One (COF - Free Report) reported fourth-quarter 2018 adjusted earnings of $1.87 per share that lagged the Zacks Consensus Estimate of $2.40. However, it compared favorably with the year-ago quarter’s adjusted earnings of $1.62.
Sallie Mae (SLM - Free Report) reported fourth-quarter 2018 core earnings of 31 cents per share, which surpassed the Zacks Consensus Estimate of 27 cents. Moreover, the figure compares favorably with 10 cents in the prior-year quarter.
Texas Capital Bancshares Inc. (TCBI - Free Report) reported negative earnings surprise of 13.8% in fourth-quarter 2018. Earnings per share of $1.38 lagged the Zacks Consensus Estimate of $1.60. However, the bottom line compares favorably with 84 cents recorded in the prior-year quarter.
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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