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Credit Acceptance (CACC) Up 13.9% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Credit Acceptance (CACC). Shares have added about 13.9% in that time frame, outperforming the S&P 500.

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

Credit Acceptance Q4 Earnings Beat, Revenues Rise Y/Y

Credit Acceptance’s fourth-quarter 2020 earnings of $9.43 per share comfortably outpaced the Zacks Consensus Estimate of $8.36. Also, the bottom line compares favorably with $8.60 earned in the prior-year quarter. The figure includes certain non-recurring items.

Increase in revenues and higher loan balance supported results. However, a slight rise in expenses was a headwind. Also, the company recorded an increase in provision during the quarter.

Excluding non-recurring items, net income (non-GAAP basis) was $189.5 million or $10.75 per share, up from $173.5 million or $9.22 per share in the prior-year quarter.

In 2020, earnings per share of $23.47 per share declined 32.1% year over year but beat the consensus estimate of $22.62. Adjusted net income was $686.3 million or $38.26 per share, up from $658.4 million or $34.70 per share in 2019.

GAAP Revenues Increase, Expenses Rise

Quarterly total revenues were $447.4 million, up 15.9% year over year. The increase was largely driven by a rise in finance charges. Moreover, the figure beat the Zacks Consensus Estimate of $436.1 million.

In 2020, total revenues grew 12.1% to $1.67 billion. Also, the top line surpassed the consensus estimate of $1.66 billion.

Provision for credit losses was $92.6 million, up substantially from $27.2 million in the year-ago quarter.

Operating expenses of $84.5 million rose nearly 1%. Higher general and administrative costs lead to the increase.

As of Dec 31, 2020, net loans receivable amounted to $6.8 billion, up 1.5% from December 2019-level. Total assets were $7.5 billion as of the same date, up from $7.4 billion. Total stockholders’ equity was $2.3 billion, down 2.3% from December 2019 end.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 19.75% due to these changes.

VGM Scores

Currently, Credit Acceptance has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, 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 D. 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 #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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