Carvana boosts profit forecast as turnaround gains momentum

Carvana raised its profit outlook as the used-car retailer said the momentum it saw from an early-year turnaround is carrying into the third quarter.

Adjusted earnings before interest, taxes, depreciation and amortization will be more than $75 million in the current three-month period, according to a statement Wednesday. That compares with a prior outlook of “positive” adjusted ebitda and a consensus analyst estimate of $45.7 million.

The revised forecast is another hopeful sign for investors as Carvana looks to regain its footing after stumbling coming out of the pandemic. The Tempe, Ariz.-based company has been grappling with heavy debt loads following an ill-fated expansion several years ago, an issue compounded by a slowdown in the used-car market.

The latest move comes just three weeks after the company reported better-than-expected second-quarter results and announced that it would restructure its debt, a relief for investors.

Shares of the company surged as much as 12% in premarket trading Wednesday on the news. They were up 7.2% to $47.20 as of 9 a.m. in New York.

Despite an eye-popping rally that has sent its stock up more than 800% this year, Carvana is still down more than 85% from it’s early-pandemic peak.

Carvana has yet to post positive net income for a full year, in part because of significant interest expenses related to its debt. The recent restructuring agreement aims to tackle that by lowering borrowings by $1.2 billion and giving the company the opportunity to delay some interest payments for the next two years.