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Credit Acceptance (CACC) Q2 Earnings Top on Higher Revenues

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Credit Acceptance Corporation’s (CACC - Free Report) second-quarter 2018 adjusted earnings of $6.95 per share surpassed the Zacks Consensus Estimate of $6.44. Also, the figure compared favorably with the year-ago quarter’s earnings of $5.22.

Results were aided by an increase in revenues and lower provisions. Also, the balance sheet remained strong during the reported quarter. However, an increase in expenses was the undermining factor.

After taking into consideration certain adjustments, net income for the reported quarter was $151 million or $7.75 per share, up from $99.1 million or $5.09 per share recorded in the prior-year quarter.

Revenues Improve, Expenses Rise

Total revenues in the reported quarter were $315.4 million, up 14.3% year over year. The increase was attributable to rise in all three components of revenues i.e. finance charges, premiums earned and other income. Also, the reported figure surpassed the Zacks Consensus Estimate of $303.6 million.

Operating expenses of $69.6 million rose 13.9% from the year-ago quarter. The rise was due to an increase in salaries and wages, and sales and marketing expenses.

Credit Quality: Mixed Bag

Provision for credit losses decreased 91.7% year over year to $1.8 million. However, allowance for credit losses at the end of the reported quarter was $435.7 million, up from $429.4 million as of Dec 31, 2017.

Strong Balance Sheet

As of Jun 30, 2018, net loans receivable amounted to $5.3 billion, increasing from $4.6 billion as of Dec 31, 2017.

Total assets were $5.9 billion as of the same date, increasing from $5 billion as of Dec 31, 2017. Also, total stockholders’ equity was $1.8 billion, up from $1.5 billion as of Dec 31, 2017.

Our Take

Credit Acceptance remains well poised for growth in revenues, given the continued rise in consumer loans. Furthermore, given a solid capital position, the company is expected to enhance shareholder value through continued share repurchases. However, increasing expenses might hurt bottom-line growth to some extent. Moreover, the use of high debt remains a matter of concern.

Credit Acceptance Corporation Price, Consensus and EPS Surprise

 

Credit Acceptance Corporation Price, Consensus and EPS Surprise | 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 Finance Companies

Among others, Capital One Financial Corporation’s (COF - Free Report) second-quarter 2018 adjusted earnings of $3.22 per share easily surpassed the Zacks Consensus Estimate of $2.63. Results benefited from rise in revenues and strength in the card business. Further, a decline in provision for credit losses and stable expenses were the tailwinds. However, a sequential fall in loans and deposits hurt the results to some extent.

Ally Financial Inc.’s (ALLY - Free Report) second-quarter 2018 adjusted earnings of 83 cents per share surpassed the Zacks Consensus Estimate of 71 cents. Results benefited from a marginal increase in total net revenues and lower provisions. However, higher expenses hurt results to some extent during the reported quarter.

Navient Corporation’s (NAVI - Free Report) second-quarter 2018 adjusted core earnings per share of 49 cents surpassed the Zacks Consensus Estimate by a penny. Results benefited from a decline in provisions. However, lower revenues, along with escalated expenses, were key headwinds.

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