Please ensure Javascript is enabled for purposes of website accessibility

Why Copart, Inc. Stock Plunged Today

By Steve Symington - Sep 19, 2018 at 3:13PM

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

The auto auction leader just missed expectations on the bottom line. Here's what investors need to know.

What happened

Shares of Copart (CPRT 1.14%) were down 14.7% as of 2:30 p.m. EDT Wednesday after the online vehicle auction specialist announced disappointing fiscal fourth-quarter 2018 earnings.

More specifically, Copart's quarterly revenue climbed 18.7% year over year to $449.2 million, which translated to adjusted (non-GAAP) net income of $102.6 million, or $0.42 per diluted share. But most investors watching the stock were anticipating higher earnings of $0.48 per share on lower revenue of $444.2 million.

Gavel and car key on sounding block with gray background

IMAGE SOURCE: GETTY IMAGES.

So what

Within Copart's top line, global service revenue grew 16.3%, while purchased car sales climbed 37.7%. And average selling prices in the U.S. climbed 11.9%, driven by the trend of newer, less-severely damaged vehicles being totaled, higher bidding activity, and favorable environments for both used car and scrap prices.

During the subsequent conference call, management also elaborated that the company spent roughly $1.7 million to prepare for Hurricane Florence, notably including both permanent and temporary storage facilities, tow trucks, loaders, dedicated catastrophic event teams and mobile command centers. Still, Copart believes the downgraded status of Florence to a tropical storm means it should require only "limited use" of its resources.

Copart CFO Jeff Liaw also explained that the company's net income was negatively impacted by around $20 million in one-time charges related to acquisitions and a change in depreciation and amortization. In particular, Copart's adjusted/non-GAAP net income does not exclude a non-cash depreciation charge of $10.5 million related to "assets newly placed into service as well as changes in the useful lives of fixed assets."

Now what

To be clear, those unusual charges should be non-recurring, and Copart's underlying business and long-term story otherwise appear to remain firmly intact. However, given its technical shortfall relative to expectations on the bottom line, and with shares already up nearly 50% so far in 2018 leading up to this report, it's no surprise to see the stock pulling back today.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Copart. The Motley Fool has a disclosure policy.

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.
CPRT
$129.97 (1.14%) $1.46

*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 analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/14/2022.

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.