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Credit Acceptance (CACC) Q3 Earnings, Revenues Lag Estimates

Zacks Equity Research

Credit Acceptance Corporation’s CACC third-quarter 2019 earnings of $8.73 per share missed the Zacks Consensus Estimate of $9.13. However, the bottom line was up 12.6% 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 remained headwinds.

Excluding the non-recurring items, net income (non-GAAP basis) was $168.4 million or $8.89 per share, up from $147.2 million or $7.56 per share in the prior-year quarter.

GAAP Revenues & Expenses Rise

Total revenues were $378.7 million, up 14.1% year over year. This increase was largely driven by rise in finance charges. However, the reported figure lagged the Zacks Consensus Estimate of $382 million.

Operating expenses of $81.7 million rose 14.3%. An increase in all cost components led to the rise.

Credit Quality Deteriorates

Provision for credit losses increased 37.9% from the year-ago quarter to $19.3 million. Moreover, allowance for credit losses at the end of the third quarter was $509.1 million, up from $461.9 million as of Dec 31, 2018.

Strong Balance Sheet

As of Sep 30, 2019, net loans receivable amounted to $6.6 billion, increasing from $5.8 billion as of Dec 31, 2018.

Total assets were $7.1 billion as of the same date, increasing from $6.2 billion on Dec 31, 2018. Also, total stockholders’ equity was $2.4 billion, up 19.7% from the end of December 2018.

Our Take

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 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 #3 (Hold). 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 third-quarter 2019 adjusted earnings of $1.01 per share surpassed the Zacks Consensus Estimate of 98 cents. The bottom line comes in 11% higher than the year-ago quarter’s reported figure.

Sallie Mae SLM delivered third-quarter 2019 positive earnings surprise of 16%. Core earnings of 29 cents per share surpassed the Zacks Consensus Estimate of 25 cents. Moreover, the figure jumped 24% from the prior-year quarter.

Capital One’s COF third-quarter adjusted earnings of $3.32 per share easily surpassed the Zacks Consensus Estimate of $2.87. Also, it improved 6% year over year.

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