based on Rogers America’s Car-Mart is expected to post earnings declines for the fourth quarter of fiscal 2022 and the year, but analysts say revenue is expected to rise to more than $1 billion.
After markets close on May 23, the buy here, pay here used car dealer is expected to report earnings fell to $3.10 per share in the quarter ended April 30, from $6.19 per share. in the same period in 2021, based on a consensus of four analysts. Fourth quarter revenue is expected to grow 6.5% to $297.23 million from $279.08 million.
For the year, earnings are expected to decline to $12.78 per share, from $14.95 per share in fiscal 2021. Revenues are expected to increase 23.1% to $1.13 billion, from $918, 61 million.
In fiscal 2002, Car-Mart’s revenue was $127 million. It rose to $588 million in 2017 and reached $745 million in 2020.
Looking ahead to earnings, equity analysts John Hecht and Kyle Joseph and equity partners Matthew Hurwit and Sagiv Hartmayer, all of Jefferies, expected revenues to rise on the back of an increase in sales and interest income. Analysts expected loss rates to increase compared to the same period last year. Costs are expected to increase 23% to $276 million.
According to the analysts, the adjusted gross margin on auto sales is expected to fall to 38.1%, from 40.2% in the same period last year. Average retail sales are expected to increase 5% to about 15,000 vehicles, and average retail price is expected to fall 5% to about $15,700 “as auto sales continue to be impacted by low supply and ongoing supply chain disruptions.” the analysts said.
“(Car-Mart) has effectively navigated an evolving used car market and remains well positioned against indirect lenders and other (buy here, pay here) operators,” she added. “Like others in the space, (Car-Mart) has shown signs of credit normalization and rising costs amid inflationary pressures.”
The analysts said that Car-Mart’s focus on sales rather than collections will lead to more customers as it invests more in purchasing and sales and marketing. The company is well positioned against competitors as indirect lenders have tightened and mom-and-pop operators face inventory problems and higher used car prices.
According to the analysts, short-term effects will have offsetting effects on Car-Mart, including higher used car prices and tighter credit, which is expected to support sales. The analysts said the company’s business model is defensive and its “block and tackle” strategy “by investing in long-term employees, building community-based stores and selling reliable vehicles that are less likely to depreciate is paying off.” the company has consistently delivered strong revenue results. Recent results have been solid despite an evolving macro background.”
On April 27, Car-Mart . completed a securitization transaction that included the issuance and sale in a private offering of $400 million in various classes of covered bonds, according to a recent filing with the U.S. Securities and Exchange Commission. The bonds are issued by ACM Auto Trust 2022-1, an indirect subsidiary of the company. The collateral for the notes consists of loans granted by the company. Net proceeds from the offering were approximately $396 million and will be used to pay debts, make the initial deposit into a reserve account, and for other general purposes.
Jefferies analysts maintained a “hold” rating on Car-Mart stock and lowered the 12-month target price from $115 to $89.
Shares of Car-Mart (NASDAQ:CMT) closed Monday (May 16) at $81.79, down $1.45 or 1.74%. Over the past 52 weeks, the stock has fluctuated between and $72.50 and $177.45.
According to the Manheim Used Vehicle Value Index, wholesale used vehicle prices fell 1% in April from March. Prices increased by 14% from April 2021.
Used car sales fell 13% in April from March, and more than half of the tax refunds have been paid so far this year, according to Manheim. Used retail sales fell 21% in April from the same month in 2021, according to DealerTrack. The distribution of the tax refund is about four weeks behind the normal pace. The average refund amount has increased by 5% from 2021.
According to vAuto, used store supply fell from 47 days in March to 46 days. According to Manheim, wholesale supply was 25 days in April, compared to 23 days in March.
According to Manheim, new vehicle sales fell 2% in April compared to March. Sales fell 19% in April, compared to the same month in 2021.
Consumer confidence fell by 0.3% in April from March, according to the Conference Board. Confidence fell 8.7% in April from the same month in 2021. Plans to buy a vehicle in the next six months rose to a three-month high, but fell from the same time last year . Plans to buy a home rose slightly but fell from the same time last year.
According to Hecht, Joseph, Hurwit and Hartmayer, used vehicle sales in 2022 are expected to be impacted by affordability and delivery issues. Year-over-year comparisons are expected to be more difficult than in 2021 “because volumes used may decline, as residual values level off and as (net write-offs) rise,” they said.
Analysts expect residual values to remain high for “a good part of (2022)”. Demand for used vehicles has declined, but prices remain close to record highs. The supply constraints can be attributed to a low flow of leased vehicles and chip shortages, which continue to affect new car production.
According to the analysts, the average amount financed for a used car increased 24.5% to $26,900 in the fourth quarter, from $21,600 in the same period in 2020. Monthly payments for the financed amounts rose 18.7% to $476. , from $401. respectively. In the coming months, the average used car loan is expected to soar to an all-time high of $27,500 amid tight car supply.
Higher vehicle values and monthly payments could disrupt low delinquencies over the next six quarters, the analyst said.