Analysts: Car-Mart revenue to rise, loss expected in Q3 fiscal 2024

Rogers-based America’s Car-Mart Inc. is expected to post a loss and a revenue increase in the third quarter of fiscal 2024 amid higher vehicle prices and lower vehicle sales.

Before the markets open Friday (March 8), the buy here, pay here used car dealer is expected to report a loss per share of 65 cents in the quarter that ended Jan. 31 compared to earnings per share of 23 cents in the same period last year. Revenue is projected to rise by 7.5% to $350.95 million from $326.53 million, based on a consensus of two analysts.

In an earnings preview, analysts John Hecht and Kyle Joseph, and associates Matthew Hurwit, Sagiv Hartmayer, Alexander Villalobos and Ibrahim Kargbo, all of Jefferies, attributed Car-Mart’s revenue growth to increases in vehicle sales prices and interest income. The higher vehicle prices are projected to support the company’s revenue as it pivots to newer vehicles with fewer miles.

The analysts said vehicle sales are expected to fall by 2.5% to 14,145 vehicles in the third quarter from the same period last year. Average sales prices are projected to rise by 4.5% to $18,905. The third-quarter price is expected to moderate narrowly from the second quarter. The year-over-year price increases have been in the low-to-mid single digits over the past four quarters after peaking at 25% in the third quarter of fiscal 2022. The year-over-year increase was 5.6% in the second quarter of fiscal 2024.

“Management commentary leads us to believe inventory procurement mix shift from older vehicles to newer vehicles may have an impact on (average sales prices) in the near-term,” the analysts said. “Moving forward and absent inventory mix shift changes, we anticipate (year-over-year) price increases to remain in the low-single digits as (Car-Mart’s) core customer battles higher interest burden and personal balance sheet/budget degradation.

“However, we believe (Car-Mart’s) positioning at the bottom of the consumer credit spectrum may provide some pricing power support. Credit tightening benefits (Car-Mart’s) customer funnel through a trade-down effect, and the company’s geographic exposure to smaller population centers insulates it from industry competition.”

According to the analysts, the following are other projections for the third quarter of fiscal 2024 compared to the same period last year:

• Gross profit margin to rise slightly to 34.6%.
• Provision for credit losses to increase by 11.7% to $95.65 million.
• Open stores to fall by three to 154.
• Net finance receivables to rise by 6.4% to $971.61 million.

The analysts said Car-Mart’s loss rates have risen while delinquency rates have been stable. Delinquency rates for auto loans across the U.S. auto finance industry have returned to more normal pre-pandemic levels.

Jefferies analysts maintained a hold rating for Car-Mart stock and a 12-month target price of $72. Shares of Car-Mart (NASDAQ: CRMT) closed Monday (March 4) at $64.18, down $3.51 or 5.19%. In the past 52 weeks, the stock has ranged between $57.61 and $127.96.