On Thursday, TD Cowen adjusted its outlook on Credit Acceptance Corp. (NASDAQ:CACC), reducing the price target to $420 from the previous $465, while maintaining a Sell rating on the stock. The adjustment followed the company's first-quarter earnings report, which revealed a diluted GAAP EPS of $5.08, falling short of both TD Cowen's estimate of $6.99 and the FactSet consensus of $7.38.
The reported earnings miss was attributed to several factors, including an increased provision for credit losses, which had a negative impact of $1.71 on the earnings per share. Additionally, higher interest expenses, which reduced EPS by $0.38, and increased operational expenditures, cutting EPS by $0.33, were significant contributors to the lower earnings. These negative effects were slightly mitigated by a $0.61 boost from higher revenue.
Credit Acceptance's adjusted diluted EPS stood at $9.28, surpassing TD Cowen's estimate of $9.07 and the FactSet consensus of $9.13. Despite this adjusted EPS outperformance, the miss on the GAAP EPS was significant enough to prompt the firm to lower its price target on the company's shares.
The company's stock performance will continue to be monitored by investors as it navigates through the financial landscape. The new price target set by TD Cowen reflects their current analysis of Credit Acceptance's financial results and market position following the first quarter earnings report.
InvestingPro Insights
In light of Credit Acceptance Corp.'s recent earnings report and subsequent price target adjustment by TD Cowen, InvestingPro data provides further context to the company's current financial standing. With a market capitalization of approximately $6.04 billion and a P/E ratio of 25.48, Credit Acceptance appears to be valued by the market at a premium compared to some industry peers. The adjusted P/E ratio for the last twelve months as of Q1 2024 stands slightly lower at 23.92, potentially indicating a slight improvement in earnings relative to the share price.
Despite a reported revenue decline of 17.5% over the last twelve months as of Q1 2024, the company maintains a robust gross profit margin of 91.95%. This high margin suggests that Credit Acceptance is still able to effectively manage its cost of goods sold relative to its revenue. However, investors should note that the company's stock price has experienced a significant drop of 15.43% over the last three months, which may be a point of concern or an opportunity, depending on the market's future outlook on the company.
Looking at InvestingPro Tips, it's worth noting that Credit Acceptance's management has been actively repurchasing shares, which could be a sign of confidence in the company's value. Additionally, the company's liquid assets exceed its short-term obligations, indicating a strong liquidity position. For those interested in deeper analysis, InvestingPro offers additional tips, including insights into the company's profitability and long-term returns. To explore these further, visit https://www.investing.com/pro/CACC and use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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