Shares of Credit Acceptance Corporation CACC lost 6.8% in after-market trading, following the release of its first-quarter 2023 results. Earnings of $7.61 per share missed the Zacks Consensus Estimate of $10.80 by a significant margin. The bottom line reflects a 49% fall from the prior-year quarter. These figures include certain non-recurring items. Our estimate for earnings was $10.86.
Results were adversely impacted by marginally lower revenues and higher operating expenses. Also, higher provisions for credit losses were an undermining factor. However, the rise in consumer loan assignment volume acted as a tailwind.
Excluding non-recurring items, net income was $127 million or $9.71 per share, down from $197.3 million or $13.76 per share in the prior-year quarter. Our estimates for adjusted net income and adjusted earnings per share were $171 million and $13.06 per share, respectively.
GAAP Revenues Decline, Operating Expenses Rise
Total GAAP revenues were $453.8 million, down marginally year over year. Lower finance charges, premiums earned and other income mainly resulted in the revenue decline. The top line missed the Zacks Consensus Estimate of $457.3 million. Our estimate for revenues was $442.1 million.
Provision for credit losses was $137.4 million, up substantially from $23.3 million in the year-ago quarter. Our estimate for the metric was $99.6 million.
Operating expenses of $117.3 million increased 14.4% year over year.
As of Mar 31, 2023, net loans receivable were $6.5 billion, up 3.2% from the December 2022 level. Total assets were $7.15 billion as of the same date, up 3.6%. Total shareholders’ equity was $1.72 billion, up 6.1%.
In the reported quarter, consumer loan assignment volumes in terms of units and dollar volumes rose 22.8% and 18.6%, respectively, on a year-over-year basis.
Persistently increasing operating expenses, mainly owing to higher salaries and wages expenses, are expected to keep hurting CACC’s bottom-line growth. Worsening credit quality will likely negatively impact financials in the near term.
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 Providers
Ally Financial’s ALLY first-quarter 2023 adjusted earnings of 82 cents per share missed the Zacks Consensus Estimate of 88 cents. The bottom line reflects a decline of 59.6% from the year-ago quarter. Our estimate for adjusted earnings was 79 cents.
ALLY's results were primarily hurt by a decline in revenues and higher expenses. A significant increase in provisions was another undermining factor. However, an increase in loans was a tailwind.
Capital One's COF first-quarter 2023 earnings of $2.31 per share lagged the Zacks Consensus Estimate of $3.80 by a wide margin. The bottom line declined 59% from the year-ago quarter. Our estimate for earnings was $2.71.
COF's results were adversely impacted by significantly higher provisions. Also, an increase in operating expenses and lower non-interest income acted as headwinds. Yet, a decent loan balance and higher interest rates aided net interest income. Further, the company witnessed a robust rise in deposit balance during the quarter.
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