Analysts predict earnings drop, stable revenue for Car-Mart in Q4

Rogers-based America’s Car-Mart Inc. is expected to see a double-digit decline in earnings and almost flat revenue growth in the fourth quarter of fiscal 2023 as expenses rise and vehicle prices stabilize. For the year, revenue is expected to rise by double digits while earnings fall by double digits.

Before the markets open May 24, the buy here, pay here used car dealer is expected to report earnings fell to $1.13 per share in the quarter ending April 30 from $4.01 per share in the same period last year, based on a consensus of three analysts. Revenue is projected to rise by 0.3% to $352.87 million from $351.84 million.

For fiscal 2023, earnings are projected to fall to $3.85 per share from $13.67 per share in fiscal 2022. Revenue is expected to rise by 10.4% to $1.34 billion from $1.21 billion.

In an earnings preview, equity analysts John Hecht and Kyle Joseph and equity associates Matthew Hurwit, Sagiv Hartmayer, Alexander Villalobos and Ibrahim Kargbo, all of Jefferies, expect Car-Mart’s fourth-quarter gross profit margin to fall by 2.79 percentage points to 30.3% from the same period last year. The fourth-quarter margin is expected to be flat from the third quarter of fiscal 2023. Fourth-quarter loss rates are expected to rise by 5.5 percentage points, leading the provision expense to rise by 16% to $87 million from the same period last year. Total expenses are projected to increase by 11% to $354 million.

The Jefferies analysts expect vehicle sales to rise by 1% to 16,600 vehicles. The average sales price is projected to rise by 1% to about $18,000 but down 0.3% from the third quarter as prices become more stable. Price increases reached a peak of 25% in the third quarter of fiscal 2022 and have moderated since then.

“Moving forward, we anticipate price increases to flatten in our outer-year projection periods as (Car-Mart’s) core customer battles persistent inflation and higher interest burden,” the Jefferies analysts said. “Despite a challenging autos market, we believe (Car-Mart) remains well positioned competitively as credit tightening benefits (Car-Mart’s) customer funnel and the company’s geographic exposure to smaller population centers insulates it from industry competition. Credit trends have normalized to pre-pandemic levels on a frequency basis, but (delinquencies) have remained fairly stable.”

The analysts also noted the recent bankruptcy filing of competitor American Car Center as an opportunity for Car-Mart to increase its market share.

Jefferies maintained a hold rating on Car-Mart stock and a 12-month target price of $84.

Shares of Car-Mart (NASDAQ: CRMT) closed Wednesday (May 17) at $87.93, up $4.42 or 5.29%. In the past 52 weeks, the stock has ranged between $52.24 and $127.05.