On Thursday, TD Cowen adjusted its outlook on shares of Credit Acceptance Corp. (NASDAQ:CACC), reducing the price target to $400 from the previous $440. The firm maintains a Sell rating on the stock.
The revision follows Credit Acceptance's second-quarter financial results, which presented a GAAP EPS loss of $(3.83), contrasting with the analyst's estimate of $6.84 and the FactSet consensus of $7.43. This significant loss was primarily attributed to a change in the company's forecasting methodology.
Despite the GAAP EPS loss, Credit Acceptance reported an adjusted EPS of $10.29, exceeding both TD Cowen's estimate of $8.87 and the FactSet consensus of $8.64. This beat was propelled by a swifter growth than anticipated. However, the company anticipates that the lower expected cash flows will result in reduced adjusted earnings for the second half of the year and beyond.
Credit Acceptance's recent financial performance indicates a disparity between the GAAP and adjusted earnings, with the latter being more favorable in the second quarter. Nevertheless, the outlook for the company's future earnings has prompted TD Cowen to adjust its price target downward, reflecting concerns over the projected decrease in adjusted earnings due to anticipated lower cash flows.
The current market sentiment for Credit Acceptance, as indicated by the Sell rating, suggests that investors should be cautious. The price target adjustment by TD Cowen takes into account the latest earnings report and the company's revised earnings forecast, which could potentially influence the stock's performance going forward.
Investors and market watchers will likely monitor how Credit Acceptance navigates the challenges ahead, particularly in terms of cash flow and earnings projections, as these factors play a critical role in the company's valuation and stock performance.
In other recent news, Credit Acceptance Corp. has witnessed significant developments in its financial performance. The company reported a GAAP EPS loss of $(3.83) in the second quarter, a stark contrast to TD Cowen's estimate of $6.84 and the FactSet consensus of $7.43.
Despite this, Credit Acceptance managed to surpass estimates with an adjusted EPS of $10.29, beating TD Cowen's prediction of $8.87 and the FactSet consensus of $8.64. Analysts from TD Cowen have responded to these recent developments by reducing their price target for the company to $400, down from $440, while maintaining a Sell rating.
In the first quarter, Credit Acceptance's diluted GAAP EPS fell short of TD Cowen's estimate of $6.99 and the FactSet consensus of $7.38, prompting another price target reduction from the firm. However, the company's adjusted diluted EPS of $9.28 outperformed both TD Cowen's estimate and the FactSet consensus.
Furthermore, Credit Acceptance's first quarter earnings for 2024 indicated a mixed financial performance with an 8% decrease in adjusted net income to $117 million. Despite a decrease in forecasted collection rates and net cash flows from the loan portfolio, the company experienced significant growth in unit and dollar volumes.
These recent developments suggest a complex financial landscape for Credit Acceptance, with both challenges and opportunities ahead.
InvestingPro Insights
In light of TD Cowen's revised outlook on Credit Acceptance Corp. (NASDAQ:CACC), it's worthwhile to consider additional insights provided by InvestingPro. Notably, analysts have recently revised their earnings upwards for the upcoming period, suggesting a potential uptick in the company's performance. Moreover, Credit Acceptance's liquid assets exceed its short-term obligations, indicating a solid financial position for managing short-term liabilities.
InvestingPro Data reveals a mixed financial picture: a high market capitalization of $6.23 billion alongside a P/E ratio of 25.42 for the last twelve months as of Q1 2024, which may be considered high relative to the industry.
Furthermore, the company has experienced a revenue decline of 17.5% in the last twelve months as of Q1 2024, which could be a point of concern for investors. On the upside, Credit Acceptance has demonstrated a strong return over the last three months, with a 16.71% total return, outpacing many competitors.
For those considering an investment in Credit Acceptance, the InvestingPro platform includes additional InvestingPro Tips that could further inform your decision. As of now, there are six more tips listed on InvestingPro, providing a deeper analysis of the company's financial health and future outlook. Visit https://www.investing.com/pro/CACC for a comprehensive set of tips and data metrics that could enrich your investment strategy.
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