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Credit Acceptance (CACC) Dips as Q3 Earnings Miss, Costs Rise
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Shares of Credit Acceptance Corporation (CACC - Free Report) lost 4.6% in the after-market trading following the release of its third-quarter 2022 results. Earnings of $6.49 per share lagged the Zacks Consensus Estimate of $11.37 by a significant margin. The bottom line reflects a 58.9% fall from the prior-year quarter. These figures include certain non-recurring items.
Results were adversely impacted by lower revenues and higher operating expenses. Also, higher provisions for credit losses posed an undermining factor. However, the rise in consumer loan assignment volume acted as a tailwind.
Excluding non-recurring items, net income (non-GAAP basis) was $178.5 million or $13.36 per share compared with $219.1 million or $13.84 per share in the prior-year quarter.
GAAP Revenues Decline, Operating Expenses Rise
Total GAAP revenues were $460.3 million, down 2.1% year over year. Lower finance charges mainly led to the revenue decline. The top line beat the Zacks Consensus Estimate of $453.3 million.
Provision for credit losses was $180.3 million against a provision benefit of $8.3 million in the year-ago quarter.
Operating expenses of $103.2 million increased 7.1% year over year.
As of Sep 30, 2022, net loans receivable were $6.31 billion, down marginally from the December 2021 level. Total assets were $6.89 billion as of the same date, down from $7.05 billion as of Dec 31, 2021. Total stockholders’ equity was $1.59 billion, down 12.9%.
In the quarter, consumer loan assignment volumes in terms of units and dollar volumes rose 29.3% and 32.1%, respectively, on a year-over-year basis.
Share Repurchase Update
In the quarter, Credit Acceptance repurchased 54,000 shares.
Our Take
Persistently increasing operating expenses, mainly owing to higher compensation and marketing-related costs, are likely to keep hurting CACC’s bottom-line growth. Worsening credit quality will likely negatively impact financials in the near term.
Credit Acceptance Corporation Price, Consensus and EPS Surprise
Ally Financial’s (ALLY - Free Report) third-quarter 2022 adjusted earnings of $1.12 per share lagged the Zacks Consensus Estimate of $1.73. The bottom line reflects a decline of 48.1% from the year-ago quarter. Our estimate for earnings was $1.75.
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 witnessed a rise in loan balances in the reported quarter.
Capital One’s (COF - Free Report) third-quarter 2022 earnings of $4.20 per share lagged the Zacks Consensus Estimate of $5.03. The bottom line plunged 38% from the year-ago quarter.
COF’s results were adversely impacted by higher provisions for credit losses on the worsening macroeconomic environment and recessionary fears. Also, an increase in operating expenses acted as a headwind. Yet, a robust improvement in loan balances and higher interest rates aided net interest income for COF.
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Credit Acceptance (CACC) Dips as Q3 Earnings Miss, Costs Rise
Shares of Credit Acceptance Corporation (CACC - Free Report) lost 4.6% in the after-market trading following the release of its third-quarter 2022 results. Earnings of $6.49 per share lagged the Zacks Consensus Estimate of $11.37 by a significant margin. The bottom line reflects a 58.9% fall from the prior-year quarter. These figures include certain non-recurring items.
Results were adversely impacted by lower revenues and higher operating expenses. Also, higher provisions for credit losses posed an undermining factor. However, the rise in consumer loan assignment volume acted as a tailwind.
Excluding non-recurring items, net income (non-GAAP basis) was $178.5 million or $13.36 per share compared with $219.1 million or $13.84 per share in the prior-year quarter.
GAAP Revenues Decline, Operating Expenses Rise
Total GAAP revenues were $460.3 million, down 2.1% year over year. Lower finance charges mainly led to the revenue decline. The top line beat the Zacks Consensus Estimate of $453.3 million.
Provision for credit losses was $180.3 million against a provision benefit of $8.3 million in the year-ago quarter.
Operating expenses of $103.2 million increased 7.1% year over year.
As of Sep 30, 2022, net loans receivable were $6.31 billion, down marginally from the December 2021 level. Total assets were $6.89 billion as of the same date, down from $7.05 billion as of Dec 31, 2021. Total stockholders’ equity was $1.59 billion, down 12.9%.
In the quarter, consumer loan assignment volumes in terms of units and dollar volumes rose 29.3% and 32.1%, respectively, on a year-over-year basis.
Share Repurchase Update
In the quarter, Credit Acceptance repurchased 54,000 shares.
Our Take
Persistently increasing operating expenses, mainly owing to higher compensation and marketing-related costs, are likely to keep hurting CACC’s bottom-line growth. Worsening credit quality will likely negatively impact financials in the near term.
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
Ally Financial’s (ALLY - Free Report) third-quarter 2022 adjusted earnings of $1.12 per share lagged the Zacks Consensus Estimate of $1.73. The bottom line reflects a decline of 48.1% from the year-ago quarter. Our estimate for earnings was $1.75.
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 witnessed a rise in loan balances in the reported quarter.
Capital One’s (COF - Free Report) third-quarter 2022 earnings of $4.20 per share lagged the Zacks Consensus Estimate of $5.03. The bottom line plunged 38% from the year-ago quarter.
COF’s results were adversely impacted by higher provisions for credit losses on the worsening macroeconomic environment and recessionary fears. Also, an increase in operating expenses acted as a headwind. Yet, a robust improvement in loan balances and higher interest rates aided net interest income for COF.