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Carvana (CVNA) Q2 Earnings Top on Higher-Than-Expected GPU
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Carvana Co. (CVNA - Free Report) incurred a loss of 55 cents per share in second-quarter 2023, significantly lower than $2.35 incurred in the year-ago quarter. The loss also came in much narrower than the Zacks Consensus Estimate of a loss of $1.13 a share. The outperformance was primarily led by higher-than-expected gross profit per unit (GPU). Revenues of $2,968 million topped the Zacks Consensus Estimate of $2,625 million but fell 23.5% year over year.
Total gross profit amounted to $499 million, up 26% year over year. Total GPU was $6,520, reflecting a jump of 94% year over year. The record total GPU topped our estimate of $6,002 on roughly $900 of non-recurring benefits. SG&A expenses were $452 million, down 37.3% year over year. Carvana achieved a positive adjusted EBITDA of $155 million in the second quarter of 2023, thanks to operational discipline. Adjusted EBITDA also included a non-recurring benefit of approximately $70 million. It should be noted that Carvana has achieved annualized cost reductions of more than $1.1 billion in the last 12 months.
Concurrent with its earnings release, Carvana announced that it reached an agreement with noteholders, representing over 90% of outstanding senior unsecured notes, to reduce total debt by over $1.2 billion. The agreement extends maturities and lowers near-term cash interest expenses, providing significant flexibility for the company's profitability and growth plan. More than 83% of Carvana's 2025 and 2027 unsecured note maturities will be eliminated, resulting in a cash interest expense reduction of more than $430 million annually for the next two years. The new exchange of notes will be secured by Carvana and ADESA assets, with strong support from senior unsecured noteholders.
Segmental Performance
Retail vehicle sales totaled $1,961 million in the quarter, falling 33.8% year over year but topping our estimate of $1,749 million, courtesy of higher-than-expected sales volume as well as average selling prices (ASPs). During the reported quarter, the number of vehicles sold to retail customers declined 35% to 76,530 from the prior-year period but surpassed our estimate of 75,665 units. Gross profit amounted to $204 million, rising 53.4% and beating our projection of $116.1 million. GPU came in at $2,666, up from $1,131 generated in the year-ago period as well as ahead of our expectations of $2,173 million owing to better-than-anticipated revenues and lower reconditioning and inbound transport costs.
In the second quarter, wholesale vehicle sales totaled $777 million, rising 10.4% year over year and surpassing our forecast of $670 million. Gross profit came in at $65 million, up 44.4% year over year and breezing past our estimate of $35 million. GPU came in at $849, rocketing from $383 generated on the back of higher ASPs and lower inbound transport costs.
In the period under consideration, other sales and revenues rose 5.5% year over year to $230 million. Gross profit was $230 million, up 5.5% year over year. GPU came in at $3,005, up 62.1% year over year as well as ahead of our estimate of $2,828 million, courtesy of better-than-anticipated revenues and lower reconditioning and inbound transport costs. Results got a boost from an increased volume of loans held and sold compared to the volume of retail units sold, along with higher origination interest rates in comparison to benchmark interest rates.
Financial Position
Carvana had cash and cash equivalents of $541 million as of Jun 30, 2023, compared with $434 million on Dec 31, 2022. Long-term debt amounted to $6,542 million as of Jun 30, 2023, compared with $6,574 million recorded on Dec 31, 2022.
Q3 Outlook
The company expects to generate positive adjusted EBITDA for the second straight quarter in the July-September period. Carvana expects total non-GAAP GPU to exceed $5,000 in the third quarter of 2023. Carvana anticipates its third-quarter retail units and SG&A costs to remain almost flat sequentially.
The Zacks Consensus Estimate for F’s 2023 sales implies year-over-year growth of 6.6%. The 2023 EPS estimate has been revised upward by 4 cents in the past 30 days. The EPS estimate for 2024 has moved north by 3 cents in the past 30 days.
The Zacks Consensus Estimate for PCAR’s 2023 sales and earnings implies year-over-year growth of 15.6% and 36.35%, respectively. The 2023 EPS estimate has been revised upward by 1 cent in the past 30 days.
The Zacks Consensus Estimate for CMI’s 2023 sales and earnings implies year-over-year growth of 17% and 31%, respectively. The EPS estimate for 2023 has moved north by 2 cents in the past seven days.
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Carvana (CVNA) Q2 Earnings Top on Higher-Than-Expected GPU
Carvana Co. (CVNA - Free Report) incurred a loss of 55 cents per share in second-quarter 2023, significantly lower than $2.35 incurred in the year-ago quarter. The loss also came in much narrower than the Zacks Consensus Estimate of a loss of $1.13 a share. The outperformance was primarily led by higher-than-expected gross profit per unit (GPU). Revenues of $2,968 million topped the Zacks Consensus Estimate of $2,625 million but fell 23.5% year over year.
Carvana Co. Price, Consensus and EPS Surprise
Carvana Co. price-consensus-eps-surprise-chart | Carvana Co. Quote
Key Highlights
Total gross profit amounted to $499 million, up 26% year over year. Total GPU was $6,520, reflecting a jump of 94% year over year. The record total GPU topped our estimate of $6,002 on roughly $900 of non-recurring benefits. SG&A expenses were $452 million, down 37.3% year over year. Carvana achieved a positive adjusted EBITDA of $155 million in the second quarter of 2023, thanks to operational discipline. Adjusted EBITDA also included a non-recurring benefit of approximately $70 million. It should be noted that Carvana has achieved annualized cost reductions of more than $1.1 billion in the last 12 months.
Concurrent with its earnings release, Carvana announced that it reached an agreement with noteholders, representing over 90% of outstanding senior unsecured notes, to reduce total debt by over $1.2 billion. The agreement extends maturities and lowers near-term cash interest expenses, providing significant flexibility for the company's profitability and growth plan. More than 83% of Carvana's 2025 and 2027 unsecured note maturities will be eliminated, resulting in a cash interest expense reduction of more than $430 million annually for the next two years. The new exchange of notes will be secured by Carvana and ADESA assets, with strong support from senior unsecured noteholders.
Segmental Performance
Retail vehicle sales totaled $1,961 million in the quarter, falling 33.8% year over year but topping our estimate of $1,749 million, courtesy of higher-than-expected sales volume as well as average selling prices (ASPs). During the reported quarter, the number of vehicles sold to retail customers declined 35% to 76,530 from the prior-year period but surpassed our estimate of 75,665 units. Gross profit amounted to $204 million, rising 53.4% and beating our projection of $116.1 million. GPU came in at $2,666, up from $1,131 generated in the year-ago period as well as ahead of our expectations of $2,173 million owing to better-than-anticipated revenues and lower reconditioning and inbound transport costs.
In the second quarter, wholesale vehicle sales totaled $777 million, rising 10.4% year over year and surpassing our forecast of $670 million. Gross profit came in at $65 million, up 44.4% year over year and breezing past our estimate of $35 million. GPU came in at $849, rocketing from $383 generated on the back of higher ASPs and lower inbound transport costs.
In the period under consideration, other sales and revenues rose 5.5% year over year to $230 million. Gross profit was $230 million, up 5.5% year over year. GPU came in at $3,005, up 62.1% year over year as well as ahead of our estimate of $2,828 million, courtesy of better-than-anticipated revenues and lower reconditioning and inbound transport costs. Results got a boost from an increased volume of loans held and sold compared to the volume of retail units sold, along with higher origination interest rates in comparison to benchmark interest rates.
Financial Position
Carvana had cash and cash equivalents of $541 million as of Jun 30, 2023, compared with $434 million on Dec 31, 2022. Long-term debt amounted to $6,542 million as of Jun 30, 2023, compared with $6,574 million recorded on Dec 31, 2022.
Q3 Outlook
The company expects to generate positive adjusted EBITDA for the second straight quarter in the July-September period. Carvana expects total non-GAAP GPU to exceed $5,000 in the third quarter of 2023. Carvana anticipates its third-quarter retail units and SG&A costs to remain almost flat sequentially.
Zacks Rank and Other Key Picks
Carvana currently carries a Zacks Rank #2 (Buy).
A few other top-ranked players in the auto space include Ford (F - Free Report) , PACCAR (PCAR - Free Report) and Cummins (CMI - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for F’s 2023 sales implies year-over-year growth of 6.6%. The 2023 EPS estimate has been revised upward by 4 cents in the past 30 days. The EPS estimate for 2024 has moved north by 3 cents in the past 30 days.
The Zacks Consensus Estimate for PCAR’s 2023 sales and earnings implies year-over-year growth of 15.6% and 36.35%, respectively. The 2023 EPS estimate has been revised upward by 1 cent in the past 30 days.
The Zacks Consensus Estimate for CMI’s 2023 sales and earnings implies year-over-year growth of 17% and 31%, respectively. The EPS estimate for 2023 has moved north by 2 cents in the past seven days.