Car-Mart stock soars over 20% after earnings, revenue beat estimates

by Jeff Della Rosa (JDellaRosa@nwabj.com) 160 views 

America’s Car-Mart shares jumped to a 52-week high of $81.85 after the markets opened Friday (Aug. 17), a day after the company released earnings and revenue that beat analysts’ expectations. As of mid-morning, the stock (NASDAQ: CRMT) was trading at $80.65, up $13.65 or 20.37%. In the past 52 weeks, the price has ranged between $81.85 and $33.05.

After the markets closed Aug. 16, the Bentonville-based buy here, pay here used car dealer reported net income rose 55.7% to $10.874 million, or $1.53 per share, in the first quarter of fiscal 2019 that ended July 31, from $6.982 million, or 90 cents per share, in the same period in fiscal 2018. Revenue increased 12% to $164.015 million.

Earnings beat estimates by 38 cents, based on a consensus of four analysts, and revenue beat estimates by $11.585 million. Excluding a first-quarter tax benefit, earnings per share were $1.40, which still beats analysts’ expectations by 25 cents.

In an earnings report, equity analysts Kyle Joseph and John Hecht, and equity associates Michael Del Grosso and Mark Drucker, all of Jefferies, said Car-Mart beat their expectations based on an increase in sales and average sales price. The number of vehicles sold increased 5.9% to 12,533 and average retail sales price rose 6.1% to $11,015. The sales price increase in part because of a rise in sales of SUVs and trucks and in vehicle purchase prices, said Vickie Judy, chief financial officer.

In a first-quarter earnings call (Aug. 17), President and CEO Jeff Williams said Car-Mart is paying more for cars than it would like as car prices have risen, but it hasn’t had an issue finding cars.

“The improvements we are observing in broader trends give us confidence that large operators such as (Car-Mart), stand to benefit as the operating environment improves over time,” according to Joseph, Hecht, Del Grosso and Drucker.

The 20 basis point rise in gross profit margin to 41.6% was positive, especially because of the strength in used car prices, and looks that Car-Mart was able to pass on rising used car prices, the analysts said. Credit continued to show signs of becoming stable as net charge offs were flat, delinquencies decreased and the loan term lengths fell.

In the earnings call, Williams said competition has been friendlier compared to what it was six to nine months ago. Customer traffic at lots has risen, and its digital marketing and advertising have helped to drive the traffic. And while the consumer has more money, Car-Mart’s internal improvements have been the biggest factor leading to better financial results.

The company plans to continue to invest into its general manager training and recruitment program. Some of it general managers have been assigned to manage multiple car lots, but other general managers might take over underperforming lots, of which the company has, Williams said.

“Everyone in Car-Mart is pretty convinced we have a lot of room to make improvements,” he said. “We believe that will translate into some better numbers down the road.”

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