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Credit Acceptance (CACC) Q1 Earnings Miss on Higher Provisions

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Credit Acceptance Corporation’s (CACC - Free Report) first-quarter 2024 earnings of $5.08 per share missed the Zacks Consensus Estimate of $6.81. The bottom line reflects a 33.2% decline from the prior-year quarter. These figures include certain non-recurring items.

Results were primarily hurt by an increase in operating expenses and higher provisions. Nevertheless, improvements in GAAP revenues and consumer loan assignment volumes were positives.

Excluding non-recurring items, net income was $117.4 million or $9.28 per share, down from $127 million or $9.71 per share in the prior-year quarter.

GAAP Revenues Improve, Operating Expenses Rise

Total GAAP revenues were $508 million, up 11.9% year over year. An increase in finance charges and premiums earned supported revenue growth. The top line beat the Zacks Consensus Estimate of $495.3 million.

Provision for credit losses was $186 million in the reported quarter, up 35.4% year over year. Our estimate for the metric was $174.1 million.

Operating expenses of $126.1 million increased 7.5% year over year. We had projected operating expenses of $120.2 million.

As of Mar 31, 2024, net loans receivables were $7.35 billion, up 5.6% from the December 2023 level. Our estimate for the metric was $6.81 billion.

Total assets were $8.10 billion as of the same date, up from $7.61 billion as of Dec 31, 2023. Total shareholders’ equity was $1.65 billion, down 5.8% sequentially.

In the reported quarter, consumer loan assignment volumes in terms of units and dollar volumes rose 24.1% and 20.2%, respectively, on a year-over-year basis.

Our Take

Mounting expenses are expected to hurt Credit Acceptance’s bottom-line growth to an extent in the near term. Moreover, poor asset quality might hamper financials. Nevertheless, the company remains well-poised for revenue growth, given the gradual increase in demand for consumer loans.

Credit Acceptance Corporation Price, Consensus and EPS Surprise


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 #3 (Hold). 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) first-quarter 2024 adjusted earnings of 45 cents per share surpassed the Zacks Consensus Estimate of 33 cents. However, the bottom line reflects a decline of 45.1% from the year-ago quarter.

ALLY’s results were primarily aided by an improvement in other revenues. However, a decline in net financing revenues, along with higher expenses and provisions, were the undermining factors.

Navient Corporation (NAVI - Free Report) reported first-quarter 2024 adjusted earnings per share (excluding regulatory-related and restructuring expenses) of 63 cents, surpassing the Zacks Consensus Estimate of 58 cents. The company reported 86 cents in the prior-year quarter.

NAVI’s results were driven by a rise in total other income and a fall in expenses. However, a decline in net interest income affected the results.

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