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Credit Acceptance (CACC) Q2 Earnings Top Estimates, Costs Up

Zacks Equity Research

Credit Acceptance Corporation’s CACC second-quarter 2019 earnings of $8.68 per share handily outpaced the Zacks Consensus Estimate of $8.49. Moreover, the bottom line compared favorably with $7.75 reported a year ago. Notably, the figure includes certain non-recurring items.

Increase in revenues supported results. Moreover, the balance sheet remained strong during the second quarter. However, an increase in expenses along with rise in provision for credit losses remained headwinds.

Excluding the non-recurring items, net income (non-GAAP basis) was $162.9 million or $8.60 per share, up from $135.4 million or $6.95 per share in the prior-year quarter.

Revenues Improve, Expenses Rise

Total revenues were $370.6 million, up 17.5% year over year. This increase was attributable to rise in all three revenue components. Also, the reported figure beat the Zacks Consensus Estimate of $360.1 million.

Operating expenses of $81.8 million rose 17.5% from the year-ago quarter. This rise was due to an increase in all components of expenses.

Credit Quality Deteriorates

Provision for credit losses increased significantly from the year-ago quarter to $15.4 million. Moreover, allowance for credit losses at the end of the reported quarter was $489.6 million, up from $461.9 million as of Dec 31, 2018.

Strong Balance Sheet

As of Jun 30, 2019, net loans receivable amounted to $6.4 billion, increasing from $5.8 billion as of Dec 31, 2018.

Total assets were $6.9 billion as of the same date, increasing from $6.2 billion on Dec 31, 2018. Also, total stockholders’ equity was $2.2 billion, up 11.3% from the end of December 2018.

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, persistently increasing expenses might hurt its 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 price-consensus-eps-surprise-chart | 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 Companies

Washington Federal’s WAFD third-quarter fiscal 2019 (ended Jun 30) earnings were 67 cents per share, surpassing the Zacks Consensus Estimate of 64 cents. The figure reflected year-over-year growth of 10%.

Hancock Whitney Corporation’s HWC second-quarter 2019 operating earnings per share of $1.01 were in line with the Zacks Consensus Estimate. The bottom line was 5.2% higher than the year-ago figure.

Ally Financial Inc.’s ALLY second-quarter 2019 adjusted earnings of 97 cents per share surpassed the Zacks Consensus Estimate of 88 cents. Further, the bottom line compared favorably with the prior-year quarter’s 83 cents.

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