How Will Copart Stock React To Its Upcoming Earnings?

Copart (NASDAQ:CPRT) , a global online auto auction platform focusing on auto salvaging, is set to publish its Q3 FY’25 earnings (April 2025 quarter) on May 22, reporting on a quarter that is likely to have  the company continue to see its volumes trend higher. Consensus estimates point to revenue of about $1.23 billion for the quarter, marking an increase of 9% year-over-year, while earnings are estimated to come in at $0.42 per share, $0.03 higher compared to last year. The company has seen its business grow in recent quarters, led by a higher supply of vehicles being scrapped due to natural disasters. Moreover, mounting vehicle repair costs and greater complexity of the latest cars also mean that insurance companies are declaring more vehicles as totaled instead of choosing to repair them. This is proving a tailwind for Copart.

Copart has $61 billion in current market capitalization. Revenue over the last twelve months was $4.5 billion, and it was operationally profitable with $1.6 billion in operating profits and net income of $1.5 billion. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative, having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

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Copart’s Historical Odds Of Positive Post-Earnings Return

Some observations on one-day (1D) post-earnings returns:

• There are 19 earnings data points recorded over the last five years, with 8 positive and 11 negative one-day (1D) returns observed. In summary, positive 1D returns were seen about 42% of the time.
• Notably, this percentage increases to 55% if we consider data for the last 3 years instead of 5 years
• Median of the 8 positive returns = 1.8%, and median of the 11 negative returns = -1.6%

Additional data for observed 5-Day (5D), and 21-Day (21D) returns post earnings are summarized along with the statistics in the table below.

Correlation Between 1D, 5D, and 21D Historical Returns

A relatively less risky strategy (though not useful if the correlation is low) is to understand the correlation between short-term and medium-term returns post earnings, find a pair that has the highest correlation, and execute the appropriate trade. For example, if 1D and 5D show the highest correlation, a trader can position themselves “long” for the next 5 days if 1D post-earnings return is positive. Here is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and subsequent 5D returns.

Is There Any Correlation With Peer Earnings?

Sometimes, peer performance can have influence on post-earnings stock reaction. In fact, the pricing-in might begin before the earnings are announced. Here is some historical data on the past post-earnings performance of Copart stock compared with the stock performance of peers that reported earnings just before Copart. For fair comparison, peer stock returns also represent post-earnings one-day (1D) returns.

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