Credit Acceptance Q2 Earnings Miss Estimates with Lower Collection Rates

Credit Acceptance Corp reported Q2 adjusted EPS of $8.56, below the consensus of $9.83, and Q2 revenue of $583.8M, in line with consensus. The company cited a decline in forecasted collection rates and slower forecasted net cash flow timing as factors contributing to the results.

Title: Credit Acceptance Corp Misses Q2 EPS Forecast; Revenue Slightly Exceeds Expectations

July 02, 2025 - Credit Acceptance Corporation (CACC) reported its second-quarter earnings for 2025, revealing a significant miss in earnings per share (EPS) compared to analyst forecasts. The company posted an EPS of $8.56, falling short of the expected $10.16, marking a negative surprise of 15.75% [1].

Despite the EPS miss, the company's revenue slightly exceeded expectations, reaching $583.8 million against a forecast of $581.12 million. The company's stock reacted negatively in the aftermarket, dropping 2.83% to $504.55. Trading at a P/E ratio of 20.78, the company maintains strong profitability with a gross margin of 92.7% [1].

Credit Acceptance’s loan portfolio reached a record $9.1 billion, up 6% year-over-year, but its market share in the used vehicle subprime segment declined to 5.4% from 6.6% the previous year. The company cited a decline in forecasted collection rates and slower forecasted net cash flow timing as factors contributing to the results [1].

During the earnings call, the company noted that the 2025 vintage is performing better than expected, and the share repurchase strategy remains active, signaling confidence in the company’s long-term prospects. InvestingPro analysis suggests the stock is currently fairly valued, with additional insights available in the comprehensive Pro Research Report [1].

Key Takeaways:
- EPS of $8.56 fell short of the expected $10.16, resulting in a negative surprise of 15.75%.
- Revenue exceeded expectations with a slight positive surprise.
- Stock price decreased by 2.83% in aftermarket trading.
- Loan portfolio reached a record $9.1 billion, up 6% year-over-year.
- Market share in the used vehicle subprime segment declined to 5.4%.

Financial Highlights:
- Revenue: $583.8 million, slightly above the forecast of $581.12 million.
- Earnings per share: $8.56, below the forecasted $10.16.
- Loan portfolio: $9.1 billion, up 6% year-over-year.
- Market share: 5.4%, down from 6.6% the previous year.

Market Reaction:
Following the earnings announcement, Credit Acceptance’s stock dropped by 2.83% in aftermarket trading, closing at $504.55. This decline reflects investor concerns over the EPS miss and the broader challenges faced by the company [1].

Outlook & Guidance:
Looking forward, Credit Acceptance expects easier year-over-year comparables post-Q3 2024. The company remains focused on maintaining a forecasted collection percentage of over 65% for the 2025 vintage, but potential impacts from tariffs and increased consumer costs could pose challenges [1].

Executive Commentary:
Jay Martin, CFO, emphasized the resilience of the business model, stating, "Our business model is designed to produce an acceptable return even if our loans underperform." CEO Ken Booth noted the uncertainty in the competitive environment, stating, "The competitive environment’s always hard to forecast how it’s gonna be going forward." Jay Brinkley, SVP and Treasurer, highlighted the company’s active share repurchase strategy, revealing that 530,000 shares were bought back at an average price of $490 [1].

Risks and Challenges:
- Competitive pressures leading to reduced market share.
- Inflation impacting loan performance and consumer purchasing power.
- Volatility in the used car market affecting loan volumes.
- Potential tariffs increasing costs for consumers and the company.
- Technological advancements needed to maintain competitive edge.

References:
[1] https://www.investing.com/news/transcripts/earnings-call-transcript-credit-acceptance-misses-q2-2025-eps-forecast-93CH-4164831