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Ally Financial (ALLY) Down 7.1% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Ally Financial (ALLY - Free Report) . Shares have lost about 7.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Ally Financial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Ally Financial’s second-quarter 2023 adjusted earnings of 96 cents per share surpassed the Zacks Consensus Estimate of 94 cents. The bottom line reflects a rise of 45.5% from the year-ago quarter.
Results were primarily aided by an improvement in other revenues. A decent increase in loans was another tailwind. However, a decline in net financing revenues, along with higher expenses and provisions, were the undermining factors.
After considering non-recurring items, net income available to common shareholders (on a GAAP basis) was $301 million or 99 cents per share, down from $454 million or $1.40 per share in the prior-year quarter. Our estimate for the metric was $299.8 million.
Revenues Improve, Expenses Rise
Total GAAP net revenues were $2.08 billion, marginally up year over year. However, the top line missed the Zacks Consensus Estimate of $2.09 billion.
Net financing revenues were down 10.8% from the prior-year quarter to $1.57 billion. The decline was primarily due to a drastic rise in interest on deposits. Our estimate for net financing revenues was $1.55 billion.
The adjusted net interest margin was 3.41%, down 65 basis points year over year.
Total other revenues were $506 million, up 62.2% from the prior-year quarter. We had projected other revenues to be $505 million.
Total non-interest expenses increased 9.8% year over year to $1.25 billion. The upswing stemmed from higher compensation and benefits expenses, insurance losses and loss-adjustment expenses, and other operating expenses. Our estimate for expenses was $1.29 billion.
The adjusted efficiency ratio was 51.7%, up from 43.9% in the year-ago period. A rise in the efficiency ratio indicates a deterioration in profitability.
Credit Quality Worsens
Non-performing loans were $1.40 billion as of Jun 30, 2023, up 1.7% year over year. Our estimate for the metric was $1.57 billion.
In the reported quarter, the company recorded net charge-offs of $399 million, up significantly from the $153 million reported in the prior-year quarter. We had projected net charge-offs of $381 million. The company also reported a provision for loan losses of $427 million, up 40.5% from $304 million in the prior-year quarter. Our estimate for provisions was $410 million.
Loans & Deposit Balances Increase
As of Jun 30, 2023, total net finance receivables and loans amounted to $134.67 billion, up 1.6% from the prior quarter. Our estimate for the metric was $133.95 billion. Deposits increased marginally from the prior-quarter end to $154.31 billion.
Capital Ratios Deteriorate
As of Jun 30, 2023, the total capital ratio was 12.5%, down from 12.7% in the prior-year quarter. Tier I capital ratio was 10.7%, down from 11.1% as of Jun 30, 2022.
Share Repurchase Update
In the reported quarter, the company did not repurchase any shares.
Outlook
NIM is expected to be 3.4% in 2023. Beyond that, NIM is expected to reach 4%.
Other revenues are projected to be $500 million in each of the quarters of 2023. For the full year, other revenues are expected to be somewhere near $1.9 billion, down from prior guidance of $2 billion.
The company remains focused on diligent expense management and the pace of expense increase is expected to decline in the quarters ahead.
In 2023, adjusted non-interest expenses are anticipated to be $4.9 billion.
Retail auto portfolio yields are expected to reach 9% by the fourth quarter of 2023.
Used-car values are expected to decline 12% in the back half of 2023, which will result in a full-year decline of 8%.
In 2023, retail auto NCOs of 1.8% is expected.
Consumer auto originations in the $40 billion range are expected to be generated in 2023.
The tax rate is anticipated to be closer to 18% for 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -8.85% due to these changes.
VGM Scores
Currently, Ally Financial has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Ally Financial has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Ally Financial (ALLY) Down 7.1% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Ally Financial (ALLY - Free Report) . Shares have lost about 7.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Ally Financial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its 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 2023 adjusted earnings of 96 cents per share surpassed the Zacks Consensus Estimate of 94 cents. The bottom line reflects a rise of 45.5% from the year-ago quarter.
Results were primarily aided by an improvement in other revenues. A decent increase in loans was another tailwind. However, a decline in net financing revenues, along with higher expenses and provisions, were the undermining factors.
After considering non-recurring items, net income available to common shareholders (on a GAAP basis) was $301 million or 99 cents per share, down from $454 million or $1.40 per share in the prior-year quarter. Our estimate for the metric was $299.8 million.
Revenues Improve, Expenses Rise
Total GAAP net revenues were $2.08 billion, marginally up year over year. However, the top line missed the Zacks Consensus Estimate of $2.09 billion.
Net financing revenues were down 10.8% from the prior-year quarter to $1.57 billion. The decline was primarily due to a drastic rise in interest on deposits. Our estimate for net financing revenues was $1.55 billion.
The adjusted net interest margin was 3.41%, down 65 basis points year over year.
Total other revenues were $506 million, up 62.2% from the prior-year quarter. We had projected other revenues to be $505 million.
Total non-interest expenses increased 9.8% year over year to $1.25 billion. The upswing stemmed from higher compensation and benefits expenses, insurance losses and loss-adjustment expenses, and other operating expenses. Our estimate for expenses was $1.29 billion.
The adjusted efficiency ratio was 51.7%, up from 43.9% in the year-ago period. A rise in the efficiency ratio indicates a deterioration in profitability.
Credit Quality Worsens
Non-performing loans were $1.40 billion as of Jun 30, 2023, up 1.7% year over year. Our estimate for the metric was $1.57 billion.
In the reported quarter, the company recorded net charge-offs of $399 million, up significantly from the $153 million reported in the prior-year quarter. We had projected net charge-offs of $381 million. The company also reported a provision for loan losses of $427 million, up 40.5% from $304 million in the prior-year quarter. Our estimate for provisions was $410 million.
Loans & Deposit Balances Increase
As of Jun 30, 2023, total net finance receivables and loans amounted to $134.67 billion, up 1.6% from the prior quarter. Our estimate for the metric was $133.95 billion. Deposits increased marginally from the prior-quarter end to $154.31 billion.
Capital Ratios Deteriorate
As of Jun 30, 2023, the total capital ratio was 12.5%, down from 12.7% in the prior-year quarter. Tier I capital ratio was 10.7%, down from 11.1% as of Jun 30, 2022.
Share Repurchase Update
In the reported quarter, the company did not repurchase any shares.
Outlook
NIM is expected to be 3.4% in 2023. Beyond that, NIM is expected to reach 4%.
Other revenues are projected to be $500 million in each of the quarters of 2023. For the full year, other revenues are expected to be somewhere near $1.9 billion, down from prior guidance of $2 billion.
The company remains focused on diligent expense management and the pace of expense increase is expected to decline in the quarters ahead.
In 2023, adjusted non-interest expenses are anticipated to be $4.9 billion.
Retail auto portfolio yields are expected to reach 9% by the fourth quarter of 2023.
Used-car values are expected to decline 12% in the back half of 2023, which will result in a full-year decline of 8%.
In 2023, retail auto NCOs of 1.8% is expected.
Consumer auto originations in the $40 billion range are expected to be generated in 2023.
The tax rate is anticipated to be closer to 18% for 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -8.85% due to these changes.
VGM Scores
Currently, Ally Financial has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Ally Financial has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.