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On Friday, TD Cowen maintained a Sell rating on Credit Acceptance Corp. (NASDAQ:CACC) but increased the price target from $420.00 to $450.00. The adjustment follows Credit Acceptance’s report of a strong fourth quarter, with diluted GAAP earnings per share (EPS) of $12.26, which surpassed both TD Cowen’s estimate of $7.98 and the Financial Sector (FS) consensus estimate of $7.10. According to InvestingPro data, the company maintains strong financial health with an impressive current ratio of 20.09, indicating robust liquidity management.
The outperformance was attributed to a lower-than-expected provision for credit losses, which came in at $123 million actual versus the $160 million estimated. Revenue was also slightly higher at $566 million compared to the $560 million estimate, and operating expenses were lower at $122 million against the $127 million estimated. InvestingPro analysis reveals the company’s strong profitability metrics, with a gross profit margin of 92.08% in the last twelve months. Subscribers can access 12+ additional ProTips and comprehensive financial metrics through the Pro Research Report.
The adjusted EPS, which excludes certain items, reached $10.17, again beating TD Cowen’s projection of $8.41. This beat was partly due to an unexpected increase in the adjusted yield, contrary to the anticipated decline. TD Cowen observed a deceleration in the deterioration of cash collections, which is expected to lead to reduced provisions and bolstered adjusted revenues and earnings going forward.
Based on these results, TD Cowen has revised its adjusted EPS estimate for 2025 upward to $37.93 from the previous $34.57, with GAAP EPS now expected to hit $44.00, up from $36.23. Additionally, the 2026 EPS estimate has been lifted to $45.25 from $41.98, with corresponding GAAP EPS projected to rise to $48.00 from $41.53. The new price target of $450.00 is set at 10 times TD Cowen’s 2026 adjusted EPS estimate. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading above its intrinsic value, with analyst targets ranging from $374 to $500.
In other recent news, Credit Acceptance Corporation significantly outperformed Q4 2024 earnings and revenue expectations. The company reported an earnings per share (EPS) of $10.17, surpassing the forecasted $7.93, and revenue of $565.9 million, exceeding the anticipated $522.6 million. Stephens analyst Kyle Joseph maintained an Equal Weight rating on the stock and raised the price target to $500 from the previous target of $452. Despite the earnings beat, Credit Acceptance’s revenue for the quarter fell slightly short of expectations. The company also saw a robust loan growth and a rise in dealer engagement, with the number of active dealers reaching 10,149. However, Credit Acceptance experienced a 4.9% drop in unit volume per active dealer. The company plans to focus on supporting dealers more effectively and is preparing for potential market changes related to an upcoming election. These are the recent developments for Credit Acceptance Corporation.
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