Copart Earnings: Wide Moat Keeps Bringing in Auction Volume

Copart's second-quarter fiscal 2025 results gave us no reason to change our fair value estimate. Revenue rose 14% year over year, while adjusted diluted earnings per share grew 21.2% to $0.40 and beat the $0.37 LSEG consensus. Although operating margin fell by 60 basis points to 36.6% as gross margin and overhead costs as a percent of revenue both were unfavorable relative to the prior-year quarter, gross profit increased 13.2% and operating income rose 12.2%. Service, or consignment revenue, are vastly higher margin than Copart auctioning a vehicle it owns, and service revenue increased at nearly twice the pace of vehicle sale revenue (15% versus 8.6%). Consignment unit volume in the US and overseas rose by 8% and 11% respectively as Copart's powerful network effect continues to draw business to its vast and highly liquid virtual auctions. Management also continues to highlight the Title Express business, when Copart processes salvage titles so insurers no longer do it themselves, as helpful in bringing insurers salvage vehicles into the Copart ecosystem, and, in turn, Copart's auctions.