A month has gone by since the last earnings report for Carvana Co. (CVNA - Free Report) . Shares have lost about 11% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Carvana Co. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Carvana Q2 Loss Narrower Than Expected, Sales Up Y/Y
Carvana reported reported second-quarter 2020 loss per share of 62 cents, narrower than the Zacks Consensus Estimate of a loss of 86 cents. Higher-than-expected sales and gross profit from used vehicle sales led to this outperformance.
The online used car dealer incurred a loss of 40 cents a share in second-quarter 2019. This downside was mainly due to lower year-over-year revenue growth and gross profit from wholesale vehicle sales.
During the reported quarter, total revenues came in at $1,118 million, which missed the Zacks Consensus Estimate of $1,130 million. However, the top-line figure increased from the year-ago number of $986 million.
During the second quarter, the number of vehicles sold to retail customers grew 25% to 55,098 compared with the prior-year period’s 44,000. Total gross profit of $150.2 million marked an increase of 8.8% year over year. However, SG&A expenses came in at $240 million, down 32% year over year. Resultantly, the firm incurred a pretax loss of $106.6 million, wider than the year-ago quarter’s $64.1 million.
Used vehicle sales totaled $992 million in second-quarter 2020, up 16% year over year. The figure also beat the Zacks Consensus Estimate of $914 million. Gross Profit for used vehicle amounted to $65.6 million, up 3.5% year over year. The reported figure also surpassed the Zacks Consensus Estimate of $52 million.
Wholesale vehicle sales amounted to $49.4 million, down from the $63 million recorded in the second quarter of 2019. The figure also missed the Zacks Consensus Estimate of $77 million. Gross Profit for wholesale vehicle amounted to $7.54 million, up 7.8% year over year. The figure outpaced the consensus mark of $1.08 million as well.
Other sales and revenues also increased to $77.1 million from the $67.4 million witnessed in the comparable quarter last year. The figure also beat the Zacks Consensus Estimate of $53 million. Gross Profit amounted to $77.1 million, up 14.4% year over year. In addition, the reported figure topped the Zacks Consensus Estimate of $48.02 million.
Notably, the company had cash and cash equivalents of $246.3 million as of Jun 30, 2020, as compared to $76 million as on Dec 31, 2019. Long-term debt amounted to $965.7 million as of Jun 30, 2020, up from $883.1 million recorded as of Dec 31, 2019.
Carvana has suspended the 2020 guidance as it expects the pandemic’s crippling impact to strain its operations in the days to come.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 17.14% due to these changes.
Currently, Carvana Co. has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Carvana Co. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.