A month has gone by since the last earnings report for Credit Acceptance (CACC - Free Report) . Shares have added about 5.8% 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’s Q2 Earnings Beat on Higher Revenues
Credit Acceptance’s 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 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 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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 7.09% due to these changes.
Currently, Credit Acceptance has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for momentum based on our style scores.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Credit Acceptance has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.