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Is an Earnings Beat Likely for Ally Financial (ALLY) in Q4?

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Ally Financial Inc. (ALLY - Free Report) is slated to report fourth-quarter and 2021 results on Jan 21, 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 and lower provisions, partly offset by a rise in expenses.

Ally Financial has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 47.5%.

Ally Financial Inc. Price and EPS Surprise


Ally Financial Inc. Price and EPS Surprise

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

Key Estimates for Q4

The Zacks Consensus Estimate for ALLY’s net financing revenues (as reported) is pegged at $1.67 billion, suggesting 4.6% growth sequentially.

Looking at the fee income components, the consensus estimate of $287 million for insurance premiums and service revenues earned suggests a rise of 2.9% sequentially. The Zacks Consensus Estimate for net gain on mortgage and automotive loans of $16 million indicates a decline of 11.1% from the previous quarter’s reported figure.

The consensus estimate for net other gains on investments is pegged at $41.33 million, indicating a 72.2% sequential rise. The consensus estimate for net other income of $144 million suggests an 18% rise.

Due to an anticipated rise in most fee income components, total non-interest income is expected to have increased in the quarter. The Zacks Consensus Estimate for total other revenues is pegged at $466 million, suggesting a rise of 19.2% sequentially.

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

Management Expectations for 2021

Management expects retail auto origination yields to be in the 7% range and used-car values to increase more than 30% year over year.

Net interest margin is expected to expand in the mid-to-upper 3% range.

Key Development in Q4

In December 2021, Ally Financial completed the acquisition of Fair Square Financial, a digital-first credit card company.

The transaction has advanced Ally Financial’s evolution as the leading digital consumer bank providing frictionless, innovative products to its growing customer base. In addition to advancing its digital offerings, the deal enhances ALLY’s ability to grow and deepen customer relationships, and provide access to the $1-trillion credit card market.

Earnings Whispers

Our proven model shows that Ally Financial has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat in fourth-quarter 2021.

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 +2.55%.

Zacks Rank: The company currently carries a Zacks Rank #3.

The Zacks Consensus Estimate for the company’s fourth-quarter earnings is pegged at $2.01, which has been revised marginally upward over the past seven days. The figure indicates a rise of 25.6% from the year-ago quarter’s reported number.

The consensus estimate for sales is pegged at $2.06 billion, suggesting a year-over-year rise of 4.1%.

Other Stocks That Warrant a Look

A few other finance stocks, which you may want to consider as these too have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Commerce Bancshares (CBSH - Free Report) , BankUnited (BKU - Free Report) and Prosperity Bancshares (PB - Free Report) .

The Earnings ESP for Commerce Bancshares is +0.71% and it carries a Zacks Rank of 3 at present. CBSH is scheduled to report quarterly numbers on Jan 19.

BankUnited is slated to report quarterly results on Jan 20. BKU currently has an Earnings ESP of +42.98% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Prosperity Bancshares is slated to report quarterly earnings on Jan 26. PB, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +0.55%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.