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What's in Store for Ally Financial (ALLY) in Q4 Earnings?

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Ally Financial Inc. (ALLY - Free Report) is slated to report fourth-quarter and 2020 results on Jan 22, before the opening bell. Its earnings and revenues for the to-be-reported quarter are expected to have increased on a year-over-year basis.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate. Results benefited from growth in revenues, partly offset by higher expenses. Moreover, a decline in provisions was a tailwind.

Notably, Ally Financial has a decent earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in two, matched in one and lagged in one of the trailing four quarters, the average beat being 37.2%.

Ally Financial Inc. Price and EPS Surprise

 

Ally Financial Inc. Price and EPS Surprise

Ally Financial Inc. price-eps-surprise | Ally Financial Inc. Quote

Activities of the company in the fourth quarter encouraged analysts to revise earnings estimates upward. Thus, the Zacks Consensus Estimate for its earnings of $1.06 for the to-be-reported quarter has increased 3.9% over the past seven days. Moreover, the estimated figure indicates a rise of 11.6% from the year-ago quarter’s reported figure.

The consensus estimate for sales is pegged at $1.66 billion, indicating a marginal increase from the year-ago quarter’s reported number.

Other Key Estimates for Q4

The Zacks Consensus Estimate for interest and fees on finance receivables and loans is pegged at $1.63 billion, indicating a rise of1.5% from the previous quarter’s reported number.

However, the consensus estimate for interest on loans held for sale of $4.50 million suggests a 10% decline sequentially.

Driven by an expected increase in interest and fees on finance receivables and loans (the major component of interest income), total financing revenue and other interest income is expected to have improved in the quarter. The consensus estimate for the same is pegged at $2.16 billion, suggesting marginal growth sequentially.

Looking at the fee income components, the consensus estimate for insurance premiums and service revenue earned of $284 million suggests a rise of 2.9% sequentially. However, the consensus estimate for net gain on mortgage and automotive loans is pegged at $6 million, reflecting a decline of 81.8% from the previous quarter’s reported number.

The Zacks Consensus Estimate for net other gain on investments is $57 million, indicating a 10.9% fall sequentially. Also, the consensus estimate for net other income indicates a decline sequentially. The consensus estimate for the same of $115 million suggests a 26.8% decline from the previous quarter.

Thus, driven by a decline in almost all fee income components, total non-interest income is expected to have fallen in the quarter. The Zacks Consensus Estimate for total other revenues is pegged at $463 million, reflecting a decline of 4.3% sequentially.

Notably, Ally Financial has been witnessing a persistent rise in expenses over the past several quarters. As it launches new products and seeks to expand into newer areas of operations, overall costs are likely to have remained elevated in the fourth quarter.

Earnings Whispers

Now, let’s check what our quantitative model predicts.

According to our quantitative model, the chances of Ally Financial beating the Zacks Consensus Estimate this time are low. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher.

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

Earnings ESP: The Earnings ESP for Ally Financial is -0.76%.

Zacks Rank: The company currently sports a Zacks Rank #1 (Strong Buy).

Stocks That Warrant a Look

Here are some finance stocks that you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat in their upcoming releases.

Invesco Ltd. (IVZ - Free Report) is slated to release earnings figures on Jan 26. The company, which flaunts a Zacks Rank #1 at present, has an Earnings ESP of +1.70%.

Capital One Financial Corporation (COF - Free Report) is slated to release earnings figures on Jan 26. The company currently carries a Zacks Rank #3 and has an Earnings ESP of +3.87%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Waddell & Reed Financial, Inc. is +5.11% and it sports a Zacks Rank #1, currently. The company is scheduled to report quarterly numbers on Feb 2.

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