What's in the Cards for Carvana (CVNA) This Earnings Season?
Carvana Co. CVNA is slated to release third-quarter 2022 results on Nov 03. The Zacks Consensus Estimate for the to-be-reported quarter’s loss per share and revenues is pegged at $2.04 and $3.7 billion, respectively.
For the third quarter, the consensus estimate for CVNA’s loss per share has widened by 5 cents in the past seven days. Its bottom-line estimates imply a decline of 436.8% from the year-ago reported number. However, the Zacks Consensus Estimate for its quarterly revenues suggests a year-over-year increase of 6.2%. Carvana failed to surpass earnings estimates over the trailing four quarters and delivered an average negative surprise of 40.67%. This is depicted in the graph below:
Carvana Co. Price and EPS Surprise
Carvana Co. price-eps-surprise | Carvana Co. Quote
Q2 Highlights
In second-quarter 2022, CVNA incurred a loss of $2.35 per share, wider than the Zacks Consensus Estimate of a loss of $1.81. Lower-than-expected used vehicle sales and other sales and revenue contributed to the downslide. The company recorded earnings of 26 cents in the year-ago quarter. Second-quarter revenues of $3,884 million also lagged the Zacks Consensus Estimate of $3,945 million but rose 16.4% year over year.
Earnings Whispers
Our proven model does not predict an earnings beat for Carvana for the quarter to be reported, as it does not have the right combination of the two key ingredients. A combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: CVNA has an Earnings ESP of -4.18%. This is because the Most Accurate Estimate is pegged at a loss of 8 cents, wider than the Zacks Consensus Estimate.
Zacks Rank: It currently carries a Zacks Rank of 4 (Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors at Play
Carvana’s intensive market expansion and digitization efforts are indeed noteworthy. But this has thrown the company in the grip of escalating SG&A expenses since its inception. SG&A costs flared up 53.4% year over year in the second quarter, and the trend is likely to have continued in the third quarter, denting margins.
In light of rising used vehicle prices, uncertain macro environment, inflationary concerns and high fuel prices, Carvana also withdrew its 2022 outlook. Also, its forecast of achieving EBITDA breakeven in the last three quarters of 2022 combined has now been pushed back amid broader industry challenges and macroeconomic headwinds. It does not expect to generate positive EBITDA until next year. All these are likely to have adversely impacted its third-quarter prospects.
Here’s a briefing of revenue estimates for Carvana’s segments.
The Zacks Consensus Estimate for used vehicle sales for the third quarter is pegged at $2,814 million, implying a year-over-year increase from $2,650 million.
The Zacks Consensus Estimate for wholesale vehicle sales for the quarter is pegged at $773 million, indicating an increase from the year-ago quarter figure of $552 million.
In the period in consideration, the Zacks Consensus Estimate for other sales and revenues is pegged at $221 million, suggesting a decline from the year-ago level of $$278 million.
Stocks With Favorable Combination
While an earnings beat is uncertain for Carvana, here are a few stocks, which, according to our model, have the right combination of elements to post an earnings beat for the quarter to be reported:
CNH Industrial CNHI will release third-quarter 2022 results on Nov 08. The company has an Earnings ESP of +6.25% and a Zacks Rank #3.
The Zacks Consensus Estimate for CNH Industrial’s to-be-reported quarter’s earnings and revenues is pegged at 32 cents per share and $5.33 billion, respectively. CNHI surpassed earnings estimates in all four trailing quarters, with the average surprise being 27.73%.
Rivian Automotive RIVN will release third-quarter 2022 results on Nov 9. The company has an Earnings ESP of +0.47% and a Zacks Rank #3.
The Zacks Consensus Estimate is pegged at a loss of $1.78 a share for Rivian’s to-be-reported quarter and the same for revenues is pegged at $512.31 million. RIVN surpassed earnings estimates in two of the trailing four quarters and missed in the rest, with the average surprise being a negative 6.68%.
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