A month has gone by since the last earnings report for Credit Acceptance (
CACC Quick Quote CACC - Free Report) . Shares have added about 6.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Credit Acceptance due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Credit Acceptance Q1 Earnings Miss Estimates as Revenues Decline
Credit Acceptance’s first-quarter 2023 earnings of $7.61 per share missed the Zacks Consensus Estimate of $10.80 by a significant margin. The bottom line reflects a 49% fall from the prior-year quarter. These figures include certain non-recurring items. Our estimate for earnings was $10.86.
Results were adversely impacted by marginally lower revenues and higher operating expenses. Also, higher provisions for credit losses were an undermining factor. However, the rise in consumer loan assignment volume acted as a tailwind. Excluding non-recurring items, net income was $127 million or $9.71 per share, down from $197.3 million or $13.76 per share in the prior-year quarter. Our estimates for adjusted net income and adjusted earnings per share were $171 million and $13.06 per share, respectively. GAAP Revenues Decline, Operating Expenses Rise
Total GAAP revenues were $453.8 million, down marginally year over year. Lower finance charges, premiums earned and other income mainly resulted in the revenue decline. The top line missed the Zacks Consensus Estimate of $457.3 million. Our estimate for revenues was $442.1 million.
Provision for credit losses was $137.4 million, up substantially from $23.3 million in the year-ago quarter. Our estimate for the metric was $99.6 million. Operating expenses of $117.3 million increased 14.4% year over year. As of Mar 31, 2023, net loans receivable were $6.5 billion, up 3.2% from the December 2022 level. Total assets were $7.15 billion as of the same date, up 3.6%. Total shareholders’ equity was $1.72 billion, up 6.1%. In the reported quarter, consumer loan assignment volumes in terms of units and dollar volumes rose 22.8% and 18.6%, respectively, on a year-over-year basis. Share Repurchase Update
In the reported quarter, Credit Acceptance repurchased 33,035 shares.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -5.27% due to these changes.
At this time, Credit Acceptance has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Credit Acceptance has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Credit Acceptance is part of the Zacks Financial - Consumer Loans industry. Over the past month, Navient (
NAVI Quick Quote NAVI - Free Report) , a stock from the same industry, has gained 2%. The company reported its results for the quarter ended March 2023 more than a month ago.
Navient reported revenues of $253 million in the last reported quarter, representing a year-over-year change of -8.3%. EPS of $1.06 for the same period compares with $0.90 a year ago.
For the current quarter, Navient is expected to post earnings of $0.78 per share, indicating a change of -15.2% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
Navient has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.