(Bloomberg) -- Carvana Co. reported stronger vehicle sales and revenue than Wall Street expected in the second quarter, pushing the used-car retailer to a surprise profit.
Net income in the period was $48 million, Carvana said Wednesday in a statement, easily topping analysts’ expectations for a loss of almost $16 million. Revenue jumped 15% to $3.4 billion, also beating estimates as the company sought to gain momentum for its turnaround plan.
The results show that its effort to grow its way out of a financial crisis caused by several years of excessive borrowing is getting some traction. The retailer spent much of 2023 retrenching its business and restructuring debt after taking on billions in debt during a years-long expansion binge, only to see used-car prices fall and losses mount.
Carvana said it expects this year’s earnings before interest, taxes, depreciation and amortization to grow from $339 million from last year to as much as $1.2 billion in 2024. It also expects vehicle sales to increase this quarter from last.
Its shares jumped 8.8% as of 4:14 p.m. after regular trading in New York.
Growing revenue is key for Carvana. The company expanded operations leading up to 2022 in anticipation of rapid growth in the used-car business by adding retail locations and with the $2.2 billion acquisition of ADESA’s US physical auction business. That gave the company far more capacity to acquire and refurbish used cars than it needed at the time.
Having cut costs and reduced its debt over the past year, Carvana is now pushing to justify its previous investment with new sales. Vehicle sales rose 33% to more than 101,000 units last quarter.
Recent revenue growth has led to stronger cash flow, which has lowered the risk of carrying so much debt, Bloomberg Intelligence analyst Joel Levington said in a research note.
While sales and profits are improving, Carvana is still contending with interest payments on its debt. Interest expense rose to $173 million last quarter from $155 million a year ago. Carvana has refinanced some debt but took on higher interest to do it, which has given management breathing room but raised the costs.
(Updates with share trading in fifth paragraph)
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