Please ensure Javascript is enabled for purposes of website accessibility

Copart's Sales and Earnings Spike in the Second Quarter

By Chris Neiger - Feb 26, 2018 at 5:21PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Net income was up by more than 50% even as the company faced an increase in operational expenses.

Online automotive auction company Copart (CPRT 1.99%) saw its revenue jump in the second quarter of fiscal 2018, and earnings spiked, even as the company continued to experience an increase in operational expenses as a result of Hurricane Harvey last year. 

Copart results: The raw numbers

Metric Q2 2018 Q2 2017 Year-Over-Year Change
Sales  $459.1 million $349.5 million 31.3%
Net income $103.2 million $66.0 million 56.3%
Earnings per share $0.43 $0.28 53.6%

Data source: Copart.

What happened with Copart this quarter

  • Total revenue was up by 31.3% year over year, to $459.1 million.
  • The vast majority of the company's revenue came from its services segment, which reported $401.9 million in revenue in the quarter.
  • Global unit sales were up 15.5% year over year.
  • Gross margins slid to 41.7% from 42% a year ago. 
  • Operating income was $150.9 million, which was a 38.6% increase from the year-ago quarter.
  • Total operating expenses grew by more than 28% year over year, to $308.1 million.
  • Copart said its operating results for the second quarter were "adversely affected" by costs of $36.5 million that were incurred as a result of Hurricane Harvey.
  • The company had a $10 million charge to income tax expenses for the repatriation of foreign earnings and profit as a result of the new tax law.
  • But Copart also received a favorable adjustment of $7.6 million to its taxes in the quarter, to account for its new federal corporate tax rate under the new tax law.

What management had to say

Copart CFO Jeff Liaw said on the earnings call that the company's U.S. average selling price increased in the quarter by 27.5% year over year, mainly due to "increased bidding activity" from buyers as newer cars were being totaled and less severely damaged cars were being designated as a total loss. 

Management spent a significant amount of time on the call discussing the impact of Hurricane Harvey on the company. Executive Vice President Will Franklin said: 

At this point, we have a clear picture on the impact of Hurricane Harvey on our financial results. Overall, we expect to lose approximately $8.2 million on the event. As always, we've conducted a comprehensive post-event review of our performance to identify areas of improvement and to prepare for the next [catastrophic event]. 

Franklin added that one of the biggest improvements Copart is making is in how it recovers and stores flooded cars. The company has acquired more permanent lots and facilities in the Houston area, and in other areas in the U.S. that are prone to hurricanes, in order to help control the costs associated with leasing land during a catastrophic event.

Looking ahead

As usual, the company's management didn't offer any guidance, but did mention that it's continuing to invest in land for the development of lots. Liaw said that, "We invested $69.4 million this past quarter, of which approximately 80% ... was for land and development, a continuation of our capacity expansion efforts in general." 

Buying up more land is still very much a part of Copart's current growth strategy and Franklin told analysts on the call that, "[W]e don't see the need for land abating in the next few years."


Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Copart, Inc. Stock Quote
Copart, Inc.
$116.69 (1.99%) $2.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.