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Credit Acceptance (CACC) Down 6.8% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Credit Acceptance (CACC - Free Report) . Shares have lost about 6.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Credit Acceptance due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Credit Acceptance Q3 Earnings & Revenues Beat Estimates

Credit Acceptance’s third-quarter 2021 earnings of $15.79 per share comfortably surpassed the Zacks Consensus Estimate of $11.95. The bottom line also reflects a 16.4% increase from the prior-year quarter. These figures include certain non-recurring items.

Results were primarily aided by an increase in revenues and a solid loan balance. However, higher expenses and a decline in provision benefit were the undermining factors.
 
Excluding non-recurring items, net income (non-GAAP basis) was $219.1 million or $13.84 per share, up from $167 million or $9.36 per share in the prior-year quarter.

GAAP Revenues Improve, Expenses Rise

Total revenues were $470.1 million, up 10.2% year over year. The increase was mainly driven by a rise in finance charges and premiums earned. The top line also beat the Zacks Consensus Estimate of $456.7 million.

Provision for credit losses was a benefit of $8.3 million compared with $29.8 million in the year-ago quarter.

Operating expenses of $96.4 million rose 19.9%. Higher salaries and wages led to the increase.

As of Sep 30, 2021, net loans receivable were $6.6 billion, down 3% from the December 2020 level. Total assets were $7.2 billion as of the same date, down from $7.5 billion as of Dec 31, 2020. Total stockholders’ equity was $2 billion, down 15.1%.

Share Repurchase Update

During the quarter, Credit Acceptance repurchased 1.3 million shares.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Credit Acceptance has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Credit Acceptance has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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