Credit Acceptance Q2 adjusted profit beats estimates on lower costs

Overview

• U.S. subprime auto lender's Q2 adjusted EPS and adjusted net income beat analyst expectations

• Consumer loan assignment unit volume declined 1% while dollar volume was flat yr/yr

• Company repurchased 2.5% of shares outstanding for $141.4 mln in Q2

Outlook

• Company says monthly loan origination volume returned to year-over-year growth in June and July

• Credit Acceptance expects further gains in call handling and unit economics as it scales AI servicing

• Company says changes in forecasted collection rates for recent loans could significantly impact future cash flows

Result Drivers

• OPERATING EXPENSES - Lower general and administrative costs and reduced salaries and wages contributed to improved profitability

• CREDIT LOSS PROVISION - Lower provision for credit losses driven by smaller declines in consumer loan performance and changes in forecasted net cash flow timing

• INTEREST EXPENSE - Lower interest expense and higher finance charges supported profitability

Company press release: ID:nGNX5Kg6QY

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "hold" and the breakdown of recommendations is no "strong buy" or "buy", 3 "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the consumer lending peer group is "buy."

• Wall Street's median 12-month price target for Credit Acceptance Corp is $575.00, about 0.4% above its August 3 closing price of $572.97

• The stock recently traded at 11 times the next 12-month earnings vs. a P/E of 10 three months ago

Reuters Recommended Reads

• Aug 3 - BCB Bancorp posts Q2 net loss on higher credit costs

• Aug 4 - First National Bank Alaska Q2 net income rises on loan growth

• Aug 3 - Oxford Bank's Q2 net income dips on higher noninterest expense

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(This story was created using Reuters automation and AI based on LSEG and company data. It was checked and edited by a Reuters journalist prior to publication.)