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On Deck Capital (ONDK) To Post Q3 Earnings: What Lies Ahead?

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On Deck Capital, Inc. (ONDK - Free Report) is scheduled to report third-quarter 2018 results on Nov 6, before the market opens. Both revenues and earnings are anticipated to reflect year-over-year improvement.

Before we discuss the factors that could influence the results, let’s take a look at how the company performed in the last reported quarter.

In the second quarter, the company’s adjusted earnings outpaced the Zacks Consensus Estimate. While the previous quarter witnessed higher revenues, an increase in expenses was the undermining factor.

Notably, On Deck Capital delivered positive earnings surprises in three out of the four trailing quarters, the average beat being 58.3%.
 

Moreover, activities of the company in third-quarter 2018 were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings for the quarter remained unchanged over the last 60 days. In fact, according to estimates, the company is expected to report positive earnings in the quarter, as against the loss posted in the prior-year period.

The company’s price performance was also impressive. Its shares have gained 2.2% in the past three months against the industry’s decline of 3.7%.

Before we take a look at what our quantitative model predicts, let’s check the factors that are expected to influence the third-quarter results.

Factors to Impact Q3 Results

On Deck Capital’s primary source of revenues is interest income, which is driven by a rising interest-rate environment. Since loan originations in the third quarter were decent, we expect interest income to escalate. Also, the company’s investments in comprehensive technology and services platform to facilitate big banks in providing online lending to small business customers will likely continue supporting overall revenue growth.

Assuming total operating expense of $44-$46 million, management projects total gross revenues in the third quarter to be $95-$100 million, up from $83.7 million recorded in the prior-year quarter.

Notably, the Zacks Consensus Estimate for sales for the quarter under review is $98.4 million, which reflects growth of 17.6% on a year-over-year basis.

The company incurs significant expenses for selling and marketing its products, along with on technology and analytics. For the soon-to-be-reported quarter, these expenses might escalate in the current era of digitization and competition.

Management expects adjusted net income of $6-$10 million, as against the loss of $1 million witnessed in the year-ago period.

Earnings Whispers

According to our quantitative model, it cannot be conclusively predicted whether On Deck Capital will be able to beat the Zacks Consensus Estimate in the third quarter or not. This is because the stock doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — which is required to increase the odds of an earnings beat.

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 the stock is currently pegged at 0.00%.

Zacks Rank: On Deck Capital currently has a Zacks Rank #2. While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings beat.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Finance Stocks

Northern Trust Corporation’s (NTRS - Free Report) third-quarter 2018 earnings per share of $1.58 missed the Zacks Consensus Estimate of $1.60, owing to high costs. However, the earning figure compared favorably with $1.20 recorded in the year-ago quarter. Escalating operating expenses acted as a headwind in the reported quarter. Yet, higher revenues and strong capital position were positives.

People's United Financial Inc. (PBCT - Free Report) delivered a negative earnings surprise of 2.9% in third-quarter 2018. Net earnings of 33 cents per share lagged the Zacks Consensus Estimate by a penny. However, the reported figure improved 26.9% year over year. Elevated expenses and provisions remained major drags. Nonetheless, rising rates and higher fee income supported its results.

Riding on higher revenues and lower provisions, U.S. Bancorp’s (USB - Free Report) third-quarter earnings per share of $1.06 outpaced the Zacks Consensus Estimate of $1.04. Also, the results came ahead of the prior-year earnings of 88 cents. Higher revenues, along with loan growth and lower provisions, were recorded in the quarter.

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