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Copart (CPRT) to Report Q2 Earnings: What's in the Offing?

Zacks Equity Research

Copart, Inc. CPRT is scheduled to release second-quarter fiscal 2020 results after the closing bell on Feb 19. The Zacks Consensus Estimate for the quarter is earnings per share of 65 cents on revenues of $572.13 million.

In the last reported quarter, the Texas-based online vehicle auctioning company reported better-than-expected returns, primarily on the back of rising service revenues across markets served by the company and expanding network of facilities.

The company has a brilliant record of earnings surprises, having outpaced the Zacks Consensus Estimate in each of the last four quarters, the average beat being 6.40%. This is depicted in the graph below:

Copart, Inc. Price and Consensus

Copart, Inc. Price and Consensus

Copart, Inc. price-consensus-chart | Copart, Inc. Quote

Which Way are the Estimates Headed?

The Zacks Consensus Estimate for revenues is pegged at $572.13 million, indicating an improvement from the $484.90 million recorded in the prior-year quarter. The Zacks Consensus Estimate for the fiscal second-quarter earnings remained unchanged at 65 cents over the past two months, calling for growth from the 52 cents recorded in the prior-year quarter.

Let's delve deeper into factors that are likely to have influenced Copart’s fiscal second-quarter earnings.

Factors Setting the Tone

Copart’s active presence across the United States and international markets is likely to have boosted its global sales volumes. High activity levels in the United States and expansion efforts in the Canadian and European markets are expected to have bolstered its quarterly revenues. During second-quarter fiscal 2020, the company made an expansion of 22-acre (90,000 square meters) in its Berlin location. It also opened its new store in Munich East location, which is 17.3 acres and has the capacity to store 1,800 vehicles in the quarter.

The Zacks Consensus Estimate for service revenues is pegged at $500 million, suggesting 19.9% year-over-year growth

In addition to opening hubs and expanding its network of facilities, the company’s strategic acquisitions are also likely to have driven revenues. Copart’s buyout of Kentucky-based online auctioning platform, Vincent Auto Solutions, has strengthened its footprint in Western Kentucky and is likely to have contributed to sales in the quarter to be reported.

However, the Zacks Consensus Estimate for quarterly vehicle sales is pegged at $68 million, calling for a decline from the prior quarter’s $68.09 million.

Increased investments to support growth initiatives — including domestic and international expansion of business — might have dented the firm’s margins. The company has been bearing the brunt of high operating expenses for the past several quarters. This trend is likely to have lowered its profit levels to some extent during the period in discussion.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Copart this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Copart has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 65 cents.

Zacks Rank: Copart currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Here are some companies, which, according to our model, have the right combination of elements to post an earnings beat in the to-be-reported quarter.

LKQ Corporation LKQ is scheduled to release earnings on Feb 20. The stock has an Earnings ESP of +1.68% and carries a Zacks Rank #3, currently.

Visteon Corporation VC is set to release quarterly numbers on Feb 20. The company has an Earnings ESP of +2.63% and carries a Zacks Rank of 3, at present.

Magna International Inc. MGA has an Earnings ESP of +1.06% and is currently a Zacks #3 Ranked player. The company is slated to report quarterly results on Feb 21.

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