Credit Acceptance (CACC) Q3 Earnings Miss, Provisions Rise
Credit Acceptance Corporation's CACC third-quarter 2023 earnings of $5.43 per share missed the Zacks Consensus Estimate of $6.59 by a significant margin. The bottom line also reflects a 16.3% fall from the prior-year quarter. These figures include certain non-recurring items.
Results were adversely impacted by an increase in operating expenses and higher provisions for credit losses. However, an improvement in GAAP revenues and consumer loan assignment volume acted as tailwinds.
Excluding non-recurring items, net income was $139.5 million or $10.70 per share, down from $178.5 million or $13.36 per share in the prior-year quarter.
GAAP Revenues & Operating Expenses Rise
Total GAAP revenues were $478.6 million, up 4% year over year. The increase in finance charges and premiums earned supported revenue growth. The top line, however, lagged the Zacks Consensus Estimate of $485.7 million.
Provision for credit losses was $184.6 million, up 2.4%. Our estimate for the metric was $177 million.
Operating expenses of $110.5 million increased 7.1% year over year. We had projected operating expenses of $116.3 million.
As of Sep 30, 2023, net loans receivable were $6.78 billion, up 10.7% from the December 2022 level. Our estimate for the metric was $6.65 billion.
Total assets were $7.4 billion as of the same date, up 7.1%. Total shareholders’ equity was $1.7 billion, up 4.7%.
In the reported quarter, consumer loan assignment volumes in terms of units and dollar volumes rose 13% and 10.5%, 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 third-quarter 2023 adjusted earnings of 83 cents per share surpassed the Zacks Consensus Estimate of 80 cents. The bottom line reflects a decline of 25.9% from the year-ago quarter.
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 for ALLY.
Navient Corporation NAVI reported third-quarter 2023 adjusted earnings per share of 47 cents, missing the Zacks Consensus Estimate of 81 cents. Also, the bottom line was lower than the prior-year quarter’s 62 cents.
Results were adversely impacted by a fall in total other income and elevated expenses. However, a rise in core net interest income acted as a tailwind for NAVI.
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