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Ally Financial (ALLY) Up 1% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Ally Financial (ALLY - Free Report) . Shares have added about 1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ally Financial due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Ally Financial’s second-quarter 2020 adjusted earnings of 61 cents per share handily surpassed the Zacks Consensus Estimate of 18 cents. However, the figure declined 37.1% from the year-ago reported number.
Results reflected growth in deposit balances and higher revenues. However, substantial reserve build to counter coronavirus crisis, higher operating expenses and fall in loan balances were headwinds.
After considering non-recurring items, net income available to common shareholders (on a GAAP basis) was $241 million or 64 cents per share, compared with the net income of $582 million or $1.46 per share recorded in the prior-year quarter.
Revenues Up, Expenses Rise
Total net revenues came in at $1.61 billion, up 4% year over year. The figure also surpassed the Zacks Consensus Estimate of $1.45 billion.
Net financing revenues were down 8.9% from the prior-year figure to $1.05 billion. This decline resulted from lower commercial auto balance and portfolio yield, losses on off-lease vehicles and higher mortgage premium amortization and consolidated liquidity levels, partly offset by higher retail portfolio yield.
Adjusted net interest margin was 2.42%, down 25 basis points (bps).
Total other revenues of $555 million climbed 40.5%, year over year.
Total non-interest expenses flared up 11.8% year over year to $985 million. This upswing mainly stemmed from rise in all cost components.
Adjusted efficiency ratio at the end of the second quarter was 52.5%, up from 46.1% recorded in the comparable year-ago period. A rise in efficiency ratio indicates deterioration in profitability.
Credit Quality Deteriorates
Non-performing loans of $1.53 billion as of Jun 30, 2020 were up 69.7% from the corresponding period of 2019. Further, net charge-off rate was 0.58%, up 2 bps.
Also, provision for loan losses surged 62.1% from the prior-year quarter to $287 million. This rise was mainly due to the reserves built to combat the pandemic-induced economic slowdown.
Loan Balance Lower, Capital Ratios Strong
Total net finance receivables and loans amounted to $122.4 billion as of Jun 30, 2020, decreasing 5.8% from the first quarter. Deposits totaled $131 billion, up 7.1% sequentially.
As of Jun 30, 2020, total capital ratio was 13.8%, improving from the prior-year quarter’s 12.7%. Tier I capital ratio was 11.9% as of Jun 30, 2020, marginally up from the year-earlier quarter’s 11.2%.
Outlook
Given the elevated off-rental and off-lease supplies, the company expects used car values to decline by more than 5% in 2020.
In the second half of 2020, NIM is expected to increase.
Retail auto NCO rate in 2020 is expected to be in the 1.8-2.1% range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted -29.69% due to these changes.
VGM Scores
At this time, Ally Financial has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ally Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Ally Financial (ALLY) Up 1% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Ally Financial (ALLY - Free Report) . Shares have added about 1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ally Financial due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Ally Financial Q2 Earnings Beat, Revenues Rise Y/Y
Ally Financial’s second-quarter 2020 adjusted earnings of 61 cents per share handily surpassed the Zacks Consensus Estimate of 18 cents. However, the figure declined 37.1% from the year-ago reported number.
Results reflected growth in deposit balances and higher revenues. However, substantial reserve build to counter coronavirus crisis, higher operating expenses and fall in loan balances were headwinds.
After considering non-recurring items, net income available to common shareholders (on a GAAP basis) was $241 million or 64 cents per share, compared with the net income of $582 million or $1.46 per share recorded in the prior-year quarter.
Revenues Up, Expenses Rise
Total net revenues came in at $1.61 billion, up 4% year over year. The figure also surpassed the Zacks Consensus Estimate of $1.45 billion.
Net financing revenues were down 8.9% from the prior-year figure to $1.05 billion. This decline resulted from lower commercial auto balance and portfolio yield, losses on off-lease vehicles and higher mortgage premium amortization and consolidated liquidity levels, partly offset by higher retail portfolio yield.
Adjusted net interest margin was 2.42%, down 25 basis points (bps).
Total other revenues of $555 million climbed 40.5%, year over year.
Total non-interest expenses flared up 11.8% year over year to $985 million. This upswing mainly stemmed from rise in all cost components.
Adjusted efficiency ratio at the end of the second quarter was 52.5%, up from 46.1% recorded in the comparable year-ago period. A rise in efficiency ratio indicates deterioration in profitability.
Credit Quality Deteriorates
Non-performing loans of $1.53 billion as of Jun 30, 2020 were up 69.7% from the corresponding period of 2019. Further, net charge-off rate was 0.58%, up 2 bps.
Also, provision for loan losses surged 62.1% from the prior-year quarter to $287 million. This rise was mainly due to the reserves built to combat the pandemic-induced economic slowdown.
Loan Balance Lower, Capital Ratios Strong
Total net finance receivables and loans amounted to $122.4 billion as of Jun 30, 2020, decreasing 5.8% from the first quarter. Deposits totaled $131 billion, up 7.1% sequentially.
As of Jun 30, 2020, total capital ratio was 13.8%, improving from the prior-year quarter’s 12.7%. Tier I capital ratio was 11.9% as of Jun 30, 2020, marginally up from the year-earlier quarter’s 11.2%.
Outlook
Given the elevated off-rental and off-lease supplies, the company expects used car values to decline by more than 5% in 2020.
In the second half of 2020, NIM is expected to increase.
Retail auto NCO rate in 2020 is expected to be in the 1.8-2.1% range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted -29.69% due to these changes.
VGM Scores
At this time, Ally Financial has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ally Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.