Copart Earnings: Consistent Industry Dominance Helps Copart End Fiscal 2023 With Good Growth

Copart’s CPRT fourth-quarter fiscal 2023 results gave us no reason to change our investment thesis or fair value estimate, but we will reassess all valuation inputs when we roll our model forward for the soon-to-be filed 10-K. We consider Copart an outstanding-quality business and its wide moat helps the firm consistently generate share gains and profit growth. Fourth-quarter adjusted diluted EPS grew 21.4% year over year to $0.34 beating the $0.32 Refinitiv consensus. A nearly 10% increase in global unit volume (about 8% United States and 22% internationally) helped drive revenue up 12.9% to $997.6 million which also beat the Refinitiv consensus of $962.9 million. Foreign currency was a $6 million tailwind for the quarter. This growth, along with declines in some costs such as transportation due to falling diesel prices, enabled strong operating leverage with operating income up 20.3% and operating margin growing by 240 basis points to 39.2%.

The firm’s average selling prices only grew slightly, but it’s still impressive that the firm’s ability to provide highly liquid auctions with increasing numbers of buyers across the globe enabled the U.S. segment’s ASPs to rise by 2% despite a low double-digit percentage decline in the Manheim Used Vehicle Value Index. Insurance companies continue to value Copart with U.S. fee (consignment) units up 8% on more insurance vehicle volume. The higher volume comes from declining used vehicle prices enabling the total loss frequency ratio to keep increasing toward its prepandemic levels in the low 20% range. For calendar 2023′s second quarter, Copart said the ratio was 18.8%, which was about 200 basis points higher than a year ago. Falling prices with expensive repair costs will continue and cause more in-accident vehicles to be declared a total loss, a critical and favorable volume driver for Copart’s auctions.