Yahoo Finance Credit Acceptance (CACC) Incurs Q1 Loss as Provisions Jump
Credit Acceptance Corporation CACC incurred first-quarter 2020 loss of $4.61 per share against the Zacks Consensus Estimate of earnings of $4.15. The company had recorded earnings of $8.65 per share in the prior-year quarter. Notably, the figure includes certain non-recurring items.
The results were adversely impacted by a significant increase in provisions and higher operating expenses. However, an improvement in revenues was a tailwind.
Excluding non-recurring items, net income (non-GAAP basis) was $175.7 million or $9.66 per share, up from $153.6 million or $8.08 per share in the prior-year quarter.
GAAP Revenues & Expenses Rise
Total revenues were $389.1 million, up 10% year over year. This increase was largely driven by a rise in finance charges. Also, the figure beat the Zacks Consensus Estimate of $339.4 million.
Operating expenses of $147.2 million rose 10.7% from the prior-year quarter. Increase in sales and marketing costs, general and administrative costs, as well as interest expenses largely attributed to the rise.
As of Mar 31, 2020, net loans receivable amounted to $6.6 billion, down 1% from the prior quarter. Total assets were $7.3 billion as of the same date, which declined 2% sequentially. Also, total stockholders’ equity was $2 billion, down 16.5% from the prior quarter.
Credit Quality Deteriorates
Provision for credit losses surged substantially from the year-ago quarter to $354.7 million. The rise was mainly due to the adoption of CECL on Jan 1, 2020 and the impact of a reduction in expected future cash flows from its loan portfolio.
Allowance for credit losses at first quarter-end was $3.2 billion, up significantly year over year.
Our Viewpoint
Credit Acceptance is well poised for revenue growth, given the persistent rise in consumer loans. However, persistently increasing expenses and deteriorating asset quality are key near-term concerns.
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
Zacks #4 (Sell) Ranked Ally Financial’s ALLY first-quarter 2020 adjusted loss was 44 cents per share against the Zacks Consensus Estimate of earnings of 71 cents. The year-ago quarterly earnings were recorded at 80 cents per share.
Sallie Mae SLM, also a #4 Ranked stock, reported first-quarter 2020 core earnings of 79 cents per share, lagging the Zacks Consensus Estimate of 88 cents. However, the figure compared favorably with 34 cents reported in the prior-year quarter.
Zacks #3 Ranked Capital One’s COF first-quarter 2020 adjusted loss was $3.02 per share against the Zacks Consensus Estimate of earnings of $2.56. The year-ago quarterly earnings were $2.90 per share.
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