Credit Acceptance (CACC) Dips on Q2 Earnings Miss, Provisions Up
Credit Acceptance Corporation's CACC shares lost 3.5% in after-market trading, following the release of its second-quarter 2023 results. Earnings of $1.69 per share missed the Zacks Consensus Estimate of $9.44 by a significant margin. The bottom line also reflects a 78.7% fall from the prior-year quarter. These figures include certain non-recurring items.
Results were adversely impacted by a marginal increase in operating expenses and higher provisions for credit losses. However, the rise in GAAP revenues and consumer loan assignment volume acted as a tailwind.
Excluding non-recurring items, net income was $140 million or $10.69 per share, down from $188.2 million or $13.92 per share in the prior-year quarter. Our estimates for adjusted net income and adjusted earnings per share were $158.5 million and $12.15 per share, respectively.
GAAP Revenues & Operating Expenses Rise
Total GAAP revenues were $477.9 million, up 4.5% year over year. The increase in finance charges, premiums earned and other income mainly resulted in the revenue growth. The top line surpassed the Zacks Consensus Estimate of $462.7 million.
Provision for credit losses was $250.5 million, up 69.8% from $147.5 million in the year-ago quarter.
Operating expenses of $117 million marginally increased year over year.
As of Jun 30, 2023, net loans receivable were $6.61 billion, up 5% from the December 2022 level. Our estimate for the metric was the same as the reported numbers. Total assets were $7.21 billion as of the same date, up 4.4%. Our estimate for total assets was $7.25 billion. Total shareholders’ equity was $1.75 billion, up 7.6%. Our estimate for the same was $1.68 billion.
In the reported quarter, consumer loan assignment volumes in terms of units and dollar volumes rose 12.8% and 8.3%, respectively, on a year-over-year basis.
Our Take
Credit Acceptance remains well-poised for revenue growth, given the gradual increase in demand for consumer loans. However, elevated expenses and a deteriorating operating environment are major near-term headwinds.
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 Providers
Ally Financial’s ALLY second-quarter 2023 adjusted earnings of 96 cents per share surpassed the Zacks Consensus Estimate of 94 cents. The bottom line reflects a rise of 45.5% from the year-ago quarter.
ALLY's results were primarily aided by an improvement in other revenues. A decent increase in loans was another tailwind. However, a decline in net financing revenues, along with higher expenses and provisions, were the undermining factors.
Capital One’s COF second-quarter 2023 earnings of $3.52 per share surpassed the Zacks Consensus Estimate of $3.31. However, the bottom line tanked 29% from the year-ago quarter.
Results were aided by an increase in net interest income and fee income. However, despite higher rates, the net interest margin declined year over year. Also, higher expenses, along with a significant rise in provisions, were the undermining factors for COF.
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