Copart, Inc: Bull or Bear?

Copart, Inc. CPRT released its fiscal third-quarter earnings results on Tuesday after the closing bell. In the wake of the earnings report, CPRT shares have risen around 1% to $27.56 during Wednesday's trading session after initially gapping lower at the open. Shares are now trading at a new 52-week high, and CPRT shares are up an impressive 15% in 2012. Looking forward, can we expect more of the same from CPRT or is this stock heading for a correction? In the third-quarter, the company reported net income of $55.47 million or $0.43 per share, versus $50.14 million or $0.35 per share, in last year's corresponding period. This was in-line with Wall Street analysts' consensus EPS estimates of $0.43. Sales in the quarter were $244.11 million compared to $236.76 million last year. This missed Wall Street consensus revenue estimates of $259.37 million. Looking at the reported numbers, CPRT's performance was hardly Earth shattering, so why is the stock actually up on Wednesday? For one, analysts at Bank of America Merrill Lynch BAC raised their earnings estimates for the company in the wake of the report. Their 2013 estimates went from $1.54 to $1.60 and their 2014 estimates were bumped from $1.66 to $1.75. They wrote that the revisions were based on "the likelihood of a lower than modeled tax rate and additional share repurchases." The analysts also raised their price target on CPRT shares from $27.00 to $29.00. Despite the positive actions from the Merrill Lynch analysts, the firm reiterated their "Underperform" rating on the stock. They wrote, "In our view, CPRT is favorably positioned in the salvage vehicle auction market and will likely continue to grow its whole car presence in the years ahead. Overall, we believe CPRT is a well run company with solid business prospects, but we downgraded the shares in September 2011 in the context of a group call, favoring companies with more leverage to a cyclical recovery in new vehicle sales. In short, we expect CPRT to continue to execute, but see greater upside potential in the shares of certain OEMs, new vehicle suppliers, and dealers with more leverage to new vehicle sales." In other words, the analysts like the company, but don't feel obliged right now to upgrade the stock - but they could - and this would be a catalyst for the share price. Nevertheless, even if analyst upgrades are not imminent, there still appears to be a lot to like about CPRT, which continues to show strong relative strength. In light of the fact that the stock is actually trading higher in the wake of the company's Q3 results, despite an in-line quarter on the bottom line and a miss on the top line, CPRT looks like it could continue to grind higher in the coming weeks.