Shares of Credit Acceptance Corporation CACC plunged 8% since the announcement of its third-quarter 2024 results on Oct. 30 after market close. Earnings per share of $6.95 lagged the Zacks Consensus Estimate of $7.88 by a considerable margin. However, the bottom line grew 16.9% year over year.
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Results were adversely impacted by higher operating expenses and provisions. Improvements in GAAP revenues and consumer loan assignment volumes were positive.
Excluding the non-recurring items, adjusted net income was $109.1 million or $8.79 per share, down from $139.5 million or $10.70 per share in the prior-year quarter.
CACC’s GAAP Revenues Increase, Operating Expenses Rise
Total GAAP revenues were $550.3 million, up 15% year over year. Increased finance charges and premiums earned supported revenue growth. The top line beat the Zacks Consensus Estimate of $542 million.
Provision for credit losses was $184.7 million, stable year over year.
Operating expenses of $129.4 million increased 17.1%.
As of Sept. 30, 2024, net loans receivables were $7.78 billion, up 11.9% from December 2023-end.
Total assets were $8.68 billion as of the same date, up from $7.61 billion as of Dec 31, 2023. Total shareholders’ equity was $1.65 billion, down from $1.75 billion as of Dec 31, 2023.
In the reported quarter, consumer loan assignment volumes in terms of units and dollar volumes rose 17.7% and 12.2%, respectively, on a year-over-year basis.
Our Take on Credit Acceptance
Mounting expenses are expected to hurt Credit Acceptance’s bottom-line growth to an extent in the near term. Moreover, poor asset quality might hamper financials. Nevertheless, the company has been well-poised for revenue growth, given the gradual increase in demand for consumer loans.
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 CACC’s Peers
Capital One’s COF third-quarter 2024 adjusted earnings of $4.51 per share surpassed the Zacks Consensus Estimate of $3.70. In the prior-year quarter, earnings per share were $4.45.
Results gained from a rise in net interest income (NII). A rise in loans and deposits was another positive. An increase in expenses and higher provisions, alongside lower non-interest income, were the undermining factors for COF.
Navient Corporation NAVI reported third-quarter 2024 adjusted earnings per share (excluding gains from the sale of Xtend Healthcare, provision for loan losses related to lowering the expected recovery rate on defaulted Private Education Loans and restructuring and regulatory-related expenses) of 28 cents, surpassing the Zacks Consensus Estimate of 23 cents. It reported 47 cents in the prior-year quarter.
NAVI’s results were driven by a rise in other income. A decline in provision for loan losses was another positive. However, a decrease in NII and a rise in expenses were headwinds.
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