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Analyst Blog

On Jun 6, 2013, we reaffirmed our long-term recommendation on CIT Group Inc. (CIT - Analyst Report) at Neutral. This is based on the company’s first-quarter results, which though lagged the Zacks Consensus Estimate, were better than the year-ago quarter figure.  

Why Neutral?

CIT Group’s first-quarter earnings came in at 81 cents per share and was nearly 9% below the Zacks Consensus Estimate. However, this was an improvement from the year-ago loss of $2.13. Lower-than-expected results were due to lower non-interest income and a rise in operating expenses, partially offset by an increased net interest revenue. However, consistently improving credit quality and stable capital ratios were the tailwinds.

Following first-quarter results, the Zacks Consensus Estimate for 2013 fell 3.0% to $3.58 per share over the last 60 days. Likewise, the Zacks Consensus Estimate for 2014 dropped 1.8% to $3.92 per share. CIT Group now has a Zacks Rank #3 (Hold).

In May 2013, CIT Group announced a $200 million worth share repurchase program. Given the company’s stable capital position, we believe that it will continue to enhance shareholder value. Further, gradual improvement in the global economy as well as domestic market  are expected to raise demands for the financing of inventories and capital equipments, thereby leading to higher earnings asset growth for CIT Group.  

However, as of Mar 31, 2013, the company provided approximately 70% of its total lending to commercial airlines, manufacturing, students, retail and services industries. The anticipated sluggish growth in these sectors could hamper the CIT Group’s growth prospects as the borrowers may not be able to make timely payment of loans and interests.

Other Stocks Worth Considering

Better performing stocks in the same industry that are worth a look include FleetCor Technologies, Inc. (FLT - Snapshot Report), Euronet Worldwide Inc. (EEFT - Snapshot Report) and Financial Engines, Inc. (FNGN - Snapshot Report). While the first stock carries a Zacks Rank #1 (Strong Buy), the other 2 have a Zacks Rank #2 (Buy).

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