It has been about a month since the last earnings report for Credit Acceptance (CACC - Free Report) . Shares have lost about 6.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Credit Acceptance due for a breakout? 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 Beats on Q1 Earnings, Costs Rise
Credit Acceptance’s 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 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.
During the reported quarter, Credit Acceptance repurchased 0.2 million shares for $91 million.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a flat path over the past two months.
Currently, Credit Acceptance has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Credit Acceptance has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.