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Will Santander Consumer (SC) Beat Earnings Estimates in Q2?

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Santander Consumer USA Holdings Inc. (SC - Free Report) is scheduled to report second-quarter 2017 results on Jul 28, before the market opens. Its earnings and revenues are projected to decline year over year.

Last quarter, Santander Consumer USA’s earnings surpassed the Zacks Consensus Estimate. Results were primarily driven by a decline in provisions. However, a rise in total operating expenses and lower revenues hurt results to quite an extent.

The company’s price performance has not been very impressive though. Despite marginally outperforming the industry it belongs to, shares of Santander Consumer USA hardly managed to gain anything year to date.

Earnings Whispers

Our proven model does not conclusively predict if Santander Consumer USA will be able to beat the Zacks Consensus Estimate in the second quarter. This is because the stock does not have the right combination of the two key ingredients, a positive Earnings ESP and a Zacks Rank #3 (Hold) or better, which is required to increase the chances of an earnings surprise.

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

Zacks ESP: The Earnings ESP for Santander Consumer USA is 0.00%. This is because the Most Accurate estimate of 62 cents matches the Zacks Consensus Estimate.

Zacks Rank: Santander Consumer USA’s Zacks Rank #3 increases the predictive power of ESP. However, we also need a positive Earnings ESP to be confident of an earnings beat.

Factors to Influence Q2 Results

Management expects net interest income for the quarter to be down 5–7% sequentially owing to credit mix, lower interest accrual on TDR loans and a smaller balance sheet.

Also, other income is expected to decrease compared with the last quarter, primarily due to lower servicing fees driven by lower managed assets and changes in consumer practices.

Thus, total revenues are likely to decline in the quarter.

Management expects operating expenses to decline by $5-$10 million on a sequential basis.

Due to seasonality, the company expects net charge-offs to be down $130–$150 million sequentially. Also, allowance for credit losses is expected to be down $20–$40 million. Thus, overall provisions are expected to be lower on a sequential basis.

However, activities of Santander Consumer USA in the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate was revised 1.6% downward over the last 30 days.

Stocks that Warrant a Look

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

Hilltop Holdings Inc. (HTH - Free Report) is slated to release its results on Jul 27. It has an Earnings ESP of +2.33% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Franklin Resources, Inc. (BEN - Free Report) has an Earnings ESP of +1.37% and a Zacks Rank #3. The company is slated to release its results on Jul 28.

CNA Financial Corporation (CNA - Free Report) is scheduled to release its results on Jul 31. It has an Earnings ESP of +4.00% and a Zacks Rank #3.

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