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Credit Acceptance (CACC) Stock Up Despite Q2 Earnings Miss
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Credit Acceptance Corporation (CACC - Free Report) second-quarter 2022 earnings of $7.94 per share lagged the Zacks Consensus Estimate of $13.09 by a significant margin. The bottom line reflects a 53.8% plunge from the prior-year quarter. These figures include certain non-recurring items.
Results were adversely impacted by lower revenues and a drastic jump in operating expenses. Also, higher provisions for credit losses on the worsening macroeconomic environment and recessionary fears posed an undermining factor.
However, the rise in consumer loan assignment volume acted as a tailwind. This was perhaps the reason for a 1.3% rally in the stock in after-trading hours.
Excluding non-recurring items, net income (non-GAAP basis) was $188.2 million or $13.92 per share compared with $230.3 million or $13.71 per share in the prior-year quarter.
GAAP Revenues Down, Expenses Surge
Total revenues were $457.4 million, down 3% year over year. Lower finance charges mainly led to a decline in revenues. The top line beat the Zacks Consensus Estimate of $443.7 million.
Provision for credit losses was $147.5 million against a provision benefit of $30.5 million in the year-ago quarter.
Operating expenses of $116.7 million jumped 66.2%. This included a $12.0 million charge related to an agreement to settle a previously-disclosed class action lawsuit and a $20.0 million increase in stock-based compensation expenses.
As of Jun 30, 2022, net loans receivable were $6.32 billion, down marginally from the December-2021 level. Total assets were $7 billion as of the same date, down from $7.05 billion as of Dec 31, 2021. Total stockholders’ equity was $1.52 billion, down 16.7%.
During the quarter, consumer loan assignment volumes in terms of unit and dollar volumes rose 5.1% and 22.0%, respectively, on a year-over-year basis.
Share Repurchase Update
During the quarter, Credit Acceptance repurchased nearly 404,000 shares.
Our Take
Credit Acceptance remains well-poised for revenue growth, given the gradual increase in demand for consumer loans. However, elevated expenses and a deteriorating operating environment are major near-term headwinds.
Credit Acceptance Corporation Price, Consensus and EPS Surprise
Capital One’s (COF - Free Report) second-quarter 2022 earnings of $4.96 per share lagged the Zacks Consensus Estimate of $5.13. The bottom line also plunged 35% from the year-ago quarter.
Results were adversely impacted by higher provisions for credit losses and an increase in operating expenses. Yet, a robust improvement in loan balances and higher interest rates aided COF’s net interest income (NII). Further, decent consumer sentiments supported the credit card business and non-interest income.
Ally Financial’s (ALLY - Free Report) second-quarter 2022 adjusted earnings of $1.76 per share lagged the Zacks Consensus Estimate of $1.90. The bottom line reflected a decline of 24.5% from the year-ago quarter.
Results were primarily hurt by a rise in expenses, a decline in other revenues and higher provisions. However, an improvement in net financing revenues was an offsetting factor. ALLY also witnessed a rise in loan balances during the quarter.
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Credit Acceptance (CACC) Stock Up Despite Q2 Earnings Miss
Credit Acceptance Corporation (CACC - Free Report) second-quarter 2022 earnings of $7.94 per share lagged the Zacks Consensus Estimate of $13.09 by a significant margin. The bottom line reflects a 53.8% plunge from the prior-year quarter. These figures include certain non-recurring items.
Results were adversely impacted by lower revenues and a drastic jump in operating expenses. Also, higher provisions for credit losses on the worsening macroeconomic environment and recessionary fears posed an undermining factor.
However, the rise in consumer loan assignment volume acted as a tailwind. This was perhaps the reason for a 1.3% rally in the stock in after-trading hours.
Excluding non-recurring items, net income (non-GAAP basis) was $188.2 million or $13.92 per share compared with $230.3 million or $13.71 per share in the prior-year quarter.
GAAP Revenues Down, Expenses Surge
Total revenues were $457.4 million, down 3% year over year. Lower finance charges mainly led to a decline in revenues. The top line beat the Zacks Consensus Estimate of $443.7 million.
Provision for credit losses was $147.5 million against a provision benefit of $30.5 million in the year-ago quarter.
Operating expenses of $116.7 million jumped 66.2%. This included a $12.0 million charge related to an agreement to settle a previously-disclosed class action lawsuit and a $20.0 million increase in stock-based compensation expenses.
As of Jun 30, 2022, net loans receivable were $6.32 billion, down marginally from the December-2021 level. Total assets were $7 billion as of the same date, down from $7.05 billion as of Dec 31, 2021. Total stockholders’ equity was $1.52 billion, down 16.7%.
During the quarter, consumer loan assignment volumes in terms of unit and dollar volumes rose 5.1% and 22.0%, respectively, on a year-over-year basis.
Share Repurchase Update
During the quarter, Credit Acceptance repurchased nearly 404,000 shares.
Our Take
Credit Acceptance remains well-poised for revenue growth, given the gradual increase in demand for consumer loans. However, elevated expenses and a deteriorating operating environment are major near-term headwinds.
Credit Acceptance Corporation Price, Consensus and EPS Surprise
Credit Acceptance Corporation price-consensus-eps-surprise-chart | Credit Acceptance Corporation Quote
Currently, Credit Acceptance carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Consumer Loan Providers
Capital One’s (COF - Free Report) second-quarter 2022 earnings of $4.96 per share lagged the Zacks Consensus Estimate of $5.13. The bottom line also plunged 35% from the year-ago quarter.
Results were adversely impacted by higher provisions for credit losses and an increase in operating expenses. Yet, a robust improvement in loan balances and higher interest rates aided COF’s net interest income (NII). Further, decent consumer sentiments supported the credit card business and non-interest income.
Ally Financial’s (ALLY - Free Report) second-quarter 2022 adjusted earnings of $1.76 per share lagged the Zacks Consensus Estimate of $1.90. The bottom line reflected a decline of 24.5% from the year-ago quarter.
Results were primarily hurt by a rise in expenses, a decline in other revenues and higher provisions. However, an improvement in net financing revenues was an offsetting factor. ALLY also witnessed a rise in loan balances during the quarter.