It has been about a month since the last earnings report for Credit Acceptance (CACC Quick QuoteCACC - Free Report) . Shares have added about 9.4% 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 drivers.

Credit Acceptance Q3 Earnings Miss, Provisions Rise Y/Y

Credit Acceptance’s third-quarter 2023 earnings of $5.43 per share missed the Zacks Consensus Estimate of $6.59 by a significant margin. The bottom line also reflects a 16.3% fall from the prior-year quarter. These figures include certain non-recurring items.

Results were adversely impacted by an increase in operating expenses and higher provisions for credit losses. However, an improvement in GAAP revenues and consumer loan assignment volume acted as tailwinds.

Excluding non-recurring items, net income was $139.5 million or $10.70 per share, down from $178.5 million or $13.36 per share in the prior-year quarter.

GAAP Revenues & Operating Expenses Rise

Total GAAP revenues were $478.6 million, up 4% year over year. The increase in finance charges and premiums earned supported revenue growth. The top line, however, lagged the Zacks Consensus Estimate of $485.7 million.

Provision for credit losses was $184.6 million, up 2.4%. Our estimate for the metric was $177 million.

Operating expenses of $110.5 million increased 7.1% year over year. We had projected operating expenses of $116.3 million.

As of Sep 30, 2023, net loans receivable were $6.78 billion, up 10.7% from the December 2022 level. Our estimate for the metric was $6.65 billion.

Total assets were $7.4 billion as of the same date, up 7.1%. Total shareholders’ equity was $1.7 billion, up 4.7%.

In the reported quarter, consumer loan assignment volumes in terms of units and dollar volumes rose 13% and 10.5%, respectively, on a year-over-year basis.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -25.03% due to these changes.

VGM Scores

Currently, Credit Acceptance has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Credit Acceptance has a Zacks Rank #5 (Strong Sell). We expect a below average 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, Discover (DFS Quick QuoteDFS - Free Report) , a stock from the same industry, has gained 6.3%. The company reported its results for the quarter ended September 2023 more than a month ago.

Discover reported revenues of $4.04 billion in the last reported quarter, representing a year-over-year change of +16.2%. EPS of $2.59 for the same period compares with $3.54 a year ago.

For the current quarter, Discover is expected to post earnings of $2.57 per share, indicating a change of -31.8% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.8% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Discover. Also, the stock has a VGM Score of C.