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Credit Acceptance (CACC) Q4 Earnings & Revenues Lag, Costs Up

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Credit Acceptance Corporation’s CACC fourth-quarter 2019 earnings of $8.60 per share missed the Zacks Consensus Estimate of $8.96. However, the bottom line was up 10.4% year over year. Notably, the figure includes certain non-recurring items.

Results reflect solid revenue growth on the back of rise in loan balance. However, an increase in operating expenses and higher provision for credit losses were headwinds.

Excluding the non-recurring items, net income (non-GAAP basis) was $173.5 million or $9.22 per share, up from $153 million or $7.85 per share in the prior-year quarter.

In 2019, reported earnings per share of $34.57 lagged the consensus estimate of $35.02 but grew 17.6% year over year. Net income (non-GAAP basis) was $658.4 million or $34.70 per share, up from $554.5 million or $28.39 per share in 2018.

GAAP Revenues & Expenses Rise

Total revenues for the quarter were $385.9 million, up 12.6% year over year. This increase was largely driven by rise in finance charges. However, the reported figure lagged the Zacks Consensus Estimate of $388.6 million.

In 2019, total revenues grew 15.8% to $1.49 billion, which was in line with the consensus estimate.

Operating expenses of $170.7 million rose 20.4%. An increase in all cost components led to the rise.

Credit Quality Deteriorates

Provision for credit losses surged 53.7% from the year-ago quarter to $27.2 million. Moreover, allowance for credit losses at the end of the fourth quarter was $536 million, up 16%.

Strong Balance Sheet

As of Dec 31, 2019, net loans receivable amounted to $6.7 billion, increasing from $5.8 billion on Dec 31, 2018.

Total assets were $7.4 billion as of the same date, increasing from $6.2 billion on Dec 31, 2018. Also, total stockholders’ equity was $2.4 billion, up 18.3%.

Our Viewpoint

Credit Acceptance is well poised for growth in revenues, given the continued rise in consumer loans. However, persistently increasing expenses and deteriorating asset quality are key near-term concerns.

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 #5 (Strong Sell).

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

Performance of Other Consumer Loan Stocks

Ally Financial Inc.’s ALLY fourth-quarter 2019 adjusted earnings of 95 cents per share were in line with the Zacks Consensus Estimate. The figure reflects an increase of 3.3% from the year-ago quarter.

Sallie Mae SLM delivered fourth-quarter 2019 positive earnings surprise of 10%. Core earnings of 33 cents per share surpassed the Zacks Consensus Estimate of 30 cents. Moreover, the figure jumped 6.5% from the prior-year quarter.

Capital One’s (COF - Free Report) fourth-quarter 2019 adjusted earnings of $2.49 per share easily surpassed the Zacks Consensus Estimate of $2.38. Also, it jumped 33% year over year.

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