Car-Mart revenue will hit $1 billion in fiscal 2022, analysts say

Based in Rogers American Car-Mart is expected to post declines in profits for the fourth quarter of fiscal 2022 and the year, but revenue is expected to reach more than $1 billion, analysts said.

After markets close May 23, the used-car dealership buy here, pay here is expected to report earnings down to $3.10 per share in the quarter ending April 30, from $6.19 per share. share over the same period in 2021, based on a consensus of four analysts. Fourth quarter revenue is expected to rise 6.5% to $297.23 million from $279.08 million.

For the year, earnings are expected to fall to $12.78 per share from $14.95 per share in fiscal 2021. Revenue is expected to rise 23.1% to $1.13 billion from 918 .61 million.

In fiscal 2002, Car-Mart’s revenues were $127 million. It grew to $588 million in 2017 and reached $745 million in 2020.

In a preview of the results, equity analysts John Hecht and Kyle Joseph and equity partners Matthew Hurwit and Sagiv Hartmayer, all of Jefferies, expected revenue to rise due to higher sales and revenue from interests. Analysts expected loss rates to rise from the same period last year. Spending is expected to rise 23% to $276 million.

According to 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 approximately 15,000 vehicles, and the average retail price is expected to decline 5% to approximately $15,700 “as car sales continue to be impacted by a weak supply and continued supply chain disruptions,” analysts said. mentioned.

“(Car-Mart) has navigated an evolving used car market effectively and remains well positioned relative to indirect lenders and other (buy here, pay here) operators,” they added. “Like others in the space, (Car-Mart) has shown signs of normalizing credit and increasing spending given inflationary pressures.”

Analysts said Car-Mart’s focus on sales rather than collections will lead to more customers as it invests more in sourcing, sales and marketing. The company is well positioned against competitors as indirect lenders have tightened and mom-and-pop operators face inventory issues and higher used-car prices.

Analysts said the short-term impacts will have offsetting effects on Car-Mart, including higher used-car prices and tighter credit, which should support sales. Analysts said the company’s business model is defensive and its ‘block and fight’ strategy ‘by investing in long-term employees, building community stores and selling reliable vehicles that will be less likely to be charged, has paid off. the company has always delivered strong results in terms of turnover. Recent results have been strong despite a changing macroeconomic backdrop.

On April 27, Car-Mart completed a securitization transaction which included the issuance and sale in a $400 million private offering in various classes of back-to-back notes, according to a recent filing with the U.S. Securities and Exchange Commission. The Notes were issued by ACM Auto Trust 2022-1, an indirect subsidiary of the Company. Collateral on the Notes includes borrowings issued by the Company. Net proceeds from the offering were approximately $396 million and are used to pay debt, make the initial deposit into a reserve account and for other general purposes.

Jefferies analysts maintained a holding rating on Car-Mart shares and lowered the 12-month price target to $89 from $115.

Shares of Car-Mart (NASDAQ: CRMT) closed Monday, May 16 at $81.79, down $1.45 or 1.74%. Over the past 52 weeks, the stock has hovered between $72.50 and $177.45.

Wholesale prices for used vehicles fell 1% in April from March, according to the Manheim Used Vehicle Value Index. Prices increased by 14% compared to April 2021.

Retail used-vehicle sales fell 13% in April from March, and more than half of tax refunds have been handed out so far this year, according to Manheim. Used retail sales fell 21% in April, compared to the same month in 2021, according to DealerTrack. The distribution of tax refunds is about four weeks behind the normal pace. The average reimbursement amount is up 5% compared to 2021.

According to vAuto, the used retail supply fell to 46 days from 47 days in March. According to Manheim, wholesale supply was 25 days in April, compared to 23 days in March.

New vehicle sales fell 2% in April, compared to March, according to Manheim. Sales fell 19% in April, compared to the same month in 2021.

According to the Conference Board, consumer confidence fell 0.3% in April compared to March. Confidence is down 8.7% in April, compared to the same month in 2021. Plans to buy a vehicle over the next six months hit their highest level in three months, but fell by compared to the same period last year. Plans to buy a home increased slightly, but declined compared to the same period last year.

According to Hecht, Joseph, Hurwit and Hartmayer, used vehicle sales in 2022 are expected to be affected by affordability and supply issues. Year-over-year comparisons are expected to be more difficult than they were in 2021 “as volumes used may decline, as residual values ​​flatten and (net charges) increase,” they said.

Analysts expect residual values ​​to remain high for “much of (2022)”. Demand for used vehicles has moderated, but prices remain near record highs. Supply constraints can be attributed to a low flow of vehicles coming out of leases and chip shortages, which continue to affect new car production.

According to analysts, the average amount financed for a used vehicle increased by 24.5% to $26,900 in the fourth quarter, compared to $21,600 in the same period in 2020. Monthly payments of amounts financed increased by 18, 7% to $476, from $401, respectively. Over the next few months, the average loan for a used vehicle should reach a record level of $27,500 in the context of a shortage of vehicles.

Higher vehicle values ​​and monthly payments could disrupt low delinquencies over the next six quarters, the analyst said.

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