CACC - Credit Acceptance falls as high provisions hit Q1 earnings

2023-05-02 13:32:35 ET

Financing company Credit Acceptance ( NASDAQ: CACC ) fell ~13% on Tuesday noon as significantly high provisions hit quarterly earnings.

The subprime lender posted Q1 non-GAAP EPS of $9.71, misses by $0.62, and revenue of $453.8M (-0.4% Y/Y), misses by $4.32M.

While revenue declined on a yearly basis, the company's Q1 provision for credit losses stood at $137.4M. This compares to $23.3M of provisions in the year-ago period.

Net income reduced to $99.5M from $214.3M.

The report comes amid analysts saying that the subprime lending industry may suffer as U.S. consumer credit reaches all-time highs alongside lower savings rates.

Credit Acceptance is one stock which we believe will suffer in worsening economic conditions after years of increasing leverage combined with riskier and riskier loans, Seeking Alpha author Jaime Wild said in a recent report.

A decline in forecasted collection rates relating to the consumer loans assigned in 2020 through 2022 impacted the Q1 results, along with a slower net cash flow timing primarily because of a decrease in consumer loan prepayments, Chief Treasury Officer Doug Busk said during the company's Q1 earnings call.

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