Will Copart's global unit volumes return to positive YoY growth by Q4 FY2026?

Q4 FY2025 showed global units -0.9%, which is a much easier comp than Q1 (-6.7%) and Q2 (-8.0%). However, the drivers of volume decline remain in place: earned car years down 4.1%, consumer coverage pullback ongoing, and Progressive's share gains creating adverse carrier mix. The Direct Buy transition depresses reported volumes by 2-4pp. For positive reported growth, the underlying (ex-Direct Buy, ex-CAT) trend would need to improve from approximately -3.6% to positive. While the easier comp helps, the structural headwinds (insurance cycle, carrier concentration) have shown no signs of abating. Total loss frequency at 24.2% provides a long-term tailwind but is insufficient to offset the volume pressures within one quarter.

The resolution allows positive growth on either reported OR ex-CAT basis, which provides two paths to YES. Ex-CAT volumes have been less negative (-4.6%, -3.6% in Q1/Q2 FY2026). If the Q4 comp is similarly easy ex-CAT, the ex-CAT volume growth could potentially turn positive. However, the insurance earned car years decline has not shown signs of bottoming. Consumer insurance coverage trends (retrenchment on collision) are driven by affordability pressures that persist in the current macro environment. Management describes these as cyclical but has not provided a timeline for recovery.

I weight the cyclical interpretation from the committee more heavily. The four lenses agreed volumes are cyclical, not competitive. Insurance underwriting cycles typically last 3-5 years, and the current soft market may be approaching the turn. If any single quarter is likely to show recovery, Q4 FY2026 has the easiest comp. Additionally, catastrophe activity is unpredictable — a significant CAT event in Q4 would boost volumes. The question asks about Q4 specifically (quarter ending April 2026), and spring/early summer often sees weather-related claims activity. I assign higher probability than pure trend extrapolation due to these cyclical considerations.

The trend is clearly negative and worsening: -6.7% in Q1, -8.0% in Q2. Even with an easier Q4 comp (-0.9%), the underlying drivers have not changed. Earned car years down 4.1%, Progressive gaining share, consumer coverage pullback continuing. Positive growth requires a significant improvement from -8% to positive within 1-2 quarters. This is possible but unlikely given no evidence of bottoming in the underlying drivers. The Direct Buy transition adds further headwind to reported volumes.

The easier Q4 FY2025 comp is the strongest argument for YES. Q4 FY2025 was already negative (-0.9%), so positive growth requires only modest improvement from the prior year. If the ex-CAT trajectory continues its modest improvement trend (-7.3% → -4.8% → -3.6% in Q1-Q2 FY2026), Q3/Q4 could approach zero or slightly positive on an ex-CAT basis. The resolution specifically allows ex-CAT basis, which makes this more achievable. However, the reported basis includes the ongoing Direct Buy transition headwind.

I anchor on the insurance industry dynamics. Earned car years declining 4.1% is a significant headwind that would need to reverse or substantially moderate for volumes to turn positive. This metric reflects insurance policy counts, which are driven by consumer behavior (keeping older cars, dropping coverage, shifting to lower-cost carriers). These trends are unlikely to reverse within 1-2 quarters. The total loss frequency tailwind (24.2%, rising) partially offsets but cannot overcome a 4.1% decline in the addressable market.

Easier Q4 comp (-0.9%) helps, and ex-CAT trend improving. But underlying insurance dynamics unchanged. Positive growth achievable but not base case. 30% reflects easier comp helping but headwinds persisting.

Volume declines worsening through H1 FY2026. Even with easier comp, need meaningful improvement in underlying drivers. Insurance cycle shows no signs of turning. Below base rate but not impossible given comp dynamics.

The ex-CAT improvement trend (-7.3% → -4.8% → -3.6%) suggests gradual recovery. If this trend continues, Q4 could approach 0% ex-CAT. Combined with easier comps and potential CAT activity in spring, positive growth on ex-CAT basis is plausible. Slightly above other estimates due to extrapolation of improving trend.