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What's in Store for LendingClub (LC) Stock in Q3 Earnings?

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LendingClub Corporation (LC - Free Report) is slated to announce third-quarter 2016 results on Nov 7, before the market opens.

Last quarter, LendingClub reported wider-than-expected loss. Significant rise in operating expenses was partly offset by higher revenues.

Further, the company has an average negative earnings surprise of 20% over the trailing four quarters.

LENDINGCLUB CP Price and EPS Surprise

 

LENDINGCLUB CP Price and EPS Surprise | LENDINGCLUB CP Quote

Earnings Whispers

Will LendingClub’s disappointing performance continue this earnings season? Let’s check what our quantitative model predicts.

Our proven model indicates that the chances of LendingClub beating the Zacks Consensus Estimate are high in the third quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold), for this to happen.

Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at +10.0% for LendingClub.

Zacks Rank: LendingClub’s Zacks Rank #3 further increases the predictive power of ESP.

Notably, the Zacks Consensus Estimate loss of 10 cents has remained stable over the last seven days.

Factors to Influence Q3 Results

It seems that the regulatory spotlight on LendingClub owing to business practice violations has not damaged its brand image among the investors. It looks like the measures undertaken (including management changes and revision to its standard program loans) to alleviate concerns should support its financials.

Further, several other challenges continue to plague the online lending sector. These include venture capital funding, interest rate risk, the economic cycle and the regulatory landscape. These are also likely to have an adverse impact on LendingClub’s top-line growth.

Notably, LendingClub had guided operating revenue to be in the $95–$105 million range for the third quarter. Though the targeted figure is lower than the prior-year quarter revenue, it is relatively stable sequentially.

Moreover, rising expenses remain a headwind. As LendingClub seeks to maximize the use of technology to make borrowing cheaper and easier, it needs to constantly maintain and upgrade its online platform, thus increasing technology-related expenses. Also, the company incurs significant expenditure for selling and marketing its products.

For the third quarter, LendingClub projects adjusted loss before interest, tax, depreciation and amortization to be in the range of $30–$15 million.

Stocks That Warrant a Look

Here are a few finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

National Health Investors Inc. (NHI - Free Report) is scheduled to announce results on Nov 7. The company has an Earnings ESP of +0.80% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ares Management, L.P. (ARES - Free Report) has an Earnings ESP of +2.63% and a Zacks Rank #2. It is scheduled to report on Nov 7.

The Earnings ESP for AerCap Holdings N.V. (AER - Free Report) is +2.82% and it has a Zacks Rank #3. The company is slated to report on Nov 8.

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