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Credit Acceptance (CACC) Beats on Q1 Earnings, Costs Rise

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Credit Acceptance Corporation’s (CACC - Free Report) first-quarter 2019 adjusted earnings of $8.08 per share handily outpaced the Zacks Consensus Estimate of $7.93. Moreover, the bottom line compared favorably with earnings of $6.11 reported a year ago.

Increase in revenues along with lower provision for credit losses supported results. Moreover, the balance sheet remained strong during the first quarter. However, an increase in expenses posed a headwind.

After taking into consideration certain non-recurring items, net income was $164.4 million or $8.65 per share, up from $120.1 million or $6.17 per share in the prior-year quarter.

Revenues Improve, Expenses Rise

Total revenues were $353.8 million, up 19.7% year over year. The increase was attributable to rise in all three revenue components. Also, the reported figure beat the Zacks Consensus Estimate of $351.9 million.

Operating expenses of $81.4 million rose 8.8% from the year-ago quarter. This rise was due to an increase in salaries and wages, and sales and marketing expenses.

Credit Quality: A Mixed Bag

Provision for credit losses decreased 38% year over year to $14.5 million. However, allowance for credit losses at the end of the reported quarter was $474.2 million, up from $461.9 million as of Dec 31, 2018.

Strong Balance Sheet

As of Mar 31, 2019, net loans receivable amounted to $6.1 billion, increasing from $5.8 billion as of Dec 31, 2018.

Total assets were $6.7 billion as of the same date, increasing from $6.2 billion on Dec 31, 2018. Also, total stockholders’ equity was $2 billion, up 2.9% from the end of the last reported quarter.

Our Take

Credit Acceptance is well poised for growth in revenues, given the continued rise in consumer loans. Furthermore, backed by 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.

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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Finance Companies

Capital One (COF - Free Report) reported first-quarter 2019 adjusted earnings of $2.90 per share, which easily surpassed the Zacks Consensus Estimate of $2.68. Also, it compared favorably with the year-ago quarter’s adjusted earnings of $2.65.

Sallie Mae (SLM - Free Report) delivered a positive earnings surprise of 13.3% in first-quarter 2019. The company reported core earnings of 34 cents per share, surpassing the Zacks Consensus Estimate of 30 cents. Moreover, the figure rose 25.9% from the prior-year quarter.

Ally Financial Inc.’s (ALLY - Free Report) first-quarter 2019 adjusted earnings of 80 cents per share surpassed the Zacks Consensus Estimate of 79 cents. Further, the bottom line compared favorably with the prior-year quarter’s figure of 68 cents.

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