What to Expect From Ally Financial (ALLY) in Q1 Earnings?

Ally Financial Inc. ALLY is slated to announce first-quarter 2018 results on Apr 26, before the market opens. Its revenues and earnings for the quarter are projected to grow year over year.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate. Results benefited from an increase in revenues. However, higher provision for loan losses and increase in expenses were the headwinds.

Moreover, the company boasts a decent earnings surprise history. Its earnings managed to surpass the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 10%.

Ally Financial Inc. Price and EPS Surprise

 

Ally Financial Inc. Price and EPS Surprise | Ally Financial Inc. Quote

Factors to Influence Q1 Results

Management expects used vehicle prices to fall. Thus, lease revenues are projected to decline during the to-be-reported quarter owing to a smaller lease portfolio as well as lower used vehicle value. Since the company primarily deals in auto loans, this might have a marginal adverse effect on its earnings in the quarter.

Further, given the higher interest rates and Ally Financial’s efforts to diversify into mortgage business, NII is expected to increase in the first quarter.

Ally Financial has been making efforts to grow inorganically, introduce new products and diversify operations. Given these initiatives, the company is likely to witness an increase in operating expenses.

Also, due to the rise in loan portfolio, provision for loan losses are expected to increase in the to-be-reported quarter.

Here is what our quantitative model predicts:

The chances of Ally Financial beating the Zacks Consensus Estimate in the first quarter are low. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to be confident of an earnings surprise call.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: Ally Financial has an Earnings ESP of -0.45%.

Zacks Rank: Ally Financial carries a Zacks Rank #3, which increases the predictive power of ESP. But we need to have positive Earnings ESP to be sure of an earnings beat.

Notably, the Zacks Consensus Estimate for earnings for the to-be-reported quarter of 66 cents reflects a jump of 37.5% on a year-over-year basis. Further, the Zacks Consensus Estimate for sales for the quarter is $1.44 billion, which reflects 4.8% year-over-year growth.

Stocks to Consider

Here are a few stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.

The Earnings ESP for SVB Financial Group SIVB is +1.38% and the stock carries a Zacks Rank of 3. The company is scheduled to release first-quarter results on Apr 26. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cullen/Frost Bankers, Inc. CFR has an Earnings ESP of +0.31% and carries a Zacks Rank of 3. It is slated to report results on Apr 26.

Eaton Vance Corp. EV has an Earnings ESP of +0.84% and a Zacks Rank #3. It is set to report results on May 23.

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Cullen/Frost Bankers, Inc. (CFR) : Free Stock Analysis Report
 
SVB Financial Group (SIVB) : Free Stock Analysis Report
 
Ally Financial Inc. (ALLY) : Free Stock Analysis Report
 
Eaton Vance Corporation (EV) : Free Stock Analysis Report
 
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