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Carvana (CVNA) Q2 Loss Wider Than Expected, Revenues Miss

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Carvana Co. (CVNA - Free Report) incurred a loss of $2.35 per share in second-quarter 2022, wider than the Zacks Consensus Estimate of a loss of $1.81. Lower-than-expected used vehicle sales and other sales and revenue contributed to the downslide. The company recorded earnings of 26 cents in the year-ago quarter.

Second-quarter revenues of $3,884 million also lagged the Zacks Consensus Estimate of $3,945 million but rose 16.4% year over year.

During the reported quarter, the number of used vehicles sold to retail customers grew 9% to 117,564 from the prior-year period. Total gross profit amounted to $396 million, down 28% year over year. SG&A expenses were $721 million, flaring up 53.4%.

Carvana Co. Price, Consensus and EPS Surprise

Carvana Co. Price, Consensus and EPS Surprise

Carvana Co. price-consensus-eps-surprise-chart | Carvana Co. Quote

Segmental Performance

Used vehicle sales totaled $2,962 million in the quarter, rising 18.3% year over year. The metric lagged the consensus mark of $2,984 million. Gross profit per unit for used vehicles amounted to $1,131, falling 44.1% and lagging the Zacks Consensus Estimate of $1,354 million.

In the second quarter, wholesale vehicle sales summed $704 million, surging 26.4% year over year and outpacing the consensus estimate of $638 million. Gross profit per unit for wholesale vehicles came in at $383, falling 30% but outpacing the consensus estimate of $303 million.

In the period in consideration, other sales and revenues fell 20.7% year over year to $218 million and lagged the consensus mark of $235 million. Gross profit per unit came in at $1,854, down 27.3% but topped the consensus mark of $1,591.

Quarter Highlights

In the quarter, the company closed its acquisition of the ADESA U.S. Physical Auction business from KAR Global for a valuation of $2.2 billion. It also opened a new inspection and reconditioning center near Richmond, VA and remains on track to open two more such centers in 2022. It also closed one center in Euclid, OH.

Financial Position

Carvana had cash and cash equivalents of $1,047 million as of Jun 30, 2022, compared with $403 million on Dec 31, 2021. Long-term debt amounted to $6,605 million as of Jun 30, 2022, significantly increasing from $3,208 million recorded on Dec 31, 2021.

Outlook

Carvana did not provide any specific numeric near-term guidance. It noted that by factoring in the current industry, economy and market environment, it shifted its focus on lowering expenses and driving positive free cash flow. It continues to expect sequential improvements in SG&A per retail unit sold in the third and fourth quarters compared to the preceding quarters, on a consolidated basis, inclusive of SG&A expenses of ADESA. It anticipates a return to more than $4,000 total GPU and significant positive EBITDA in financial year 2023, both including and excluding ADESA gross profit and SG&A expenses.

Zacks Rank & Key Picks

CVNA carries a Zacks Rank #4 (Sell), currently.

Better-ranked players in the auto space include Harley-Davidson (HOG - Free Report) , Genuine Parts Company (GPC - Free Report) and PACCAR Inc. (PCAR - Free Report) , each carrying a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Harley-Davidson has an expected earnings growth rate of 6.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 7% upward in the past 30 days.

Harley-Davidson’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. HOG pulled off a trailing four-quarter earnings surprise of 49.52%, on average. The stock has declined 6.8% in the past year.

Genuine Parts has an expected earnings growth rate of 15% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 1.3% upward in the past 30 days.

Genuine Parts’ earnings beat the Zacks Consensus Estimate in all of the trailing four quarters. GPC pulled off a trailing four-quarter earnings surprise of 11.03%, on average. The stock has risen 20.7% over the past year.

PACCAR has an expected earnings growth rate of 45.3% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 7.4% upward in the past 30 days.

PACCAR’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. PCAR pulled off a trailing four-quarter earnings surprise of 7.44%, on average. The stock has risen 13.5% in the past year.


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