It has been about a month since the last earnings report for Ally Financial (ALLY - Free Report) . Shares have lost about 8.2% 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 catalysts.
Ally Financial Q2 Earnings Beat Estimates, Costs Rise
Ally Financial’s second-quarter 2019 adjusted earnings of 97 cents per share surpassed the Zacks Consensus Estimate of 88 cents. Further, the bottom line compared favorably with the prior-year quarter’s earnings of 83 cents.
Results benefited from an improvement in revenues. Moreover, the quarter witnessed growth in deposit balances. However, higher non-interest expenses along with rise in provisions were major headwinds.
After taking into consideration non-recurring items, net income available to common shareholders (GAAP basis) was $582 million, increasing from $349 million registered in the prior-year quarter.
Revenues Improve, Expenses Rise
Total net revenues were nearly $1.55 billion, up 6.4% year over year. Further, the figure marginally surpassed the Zacks Consensus Estimate of $1.54 billion.
Total non-interest expenses increased 5% year over year to $881 million. This rise was due to an increase in all components of expenses.
Credit Quality: Mixed Bag
Non-performing loans of $903 million at the end of the reported quarter were down marginally from $905 million reported in the prior-year quarter end. However, provision for loan losses increased 12% year over year to $177 million.
Strong Balance Sheet, Capital Ratios Mixed
Total net finance receivables and loans amounted to $127.93 billion as of Jun 30, 2019, compared with $128.77 billion as of Mar 31, 2019. Deposits totaled $116.33 billion, increasing from $113.30 billion as of Mar 31, 2019.
As of Jun 30, 2019, total capital ratio was 12.7%, unchanged from the prior-year quarter end. Tier I capital ratio was 11.2%, up from 11.1% as of Jun 30, 2018.
During the reported quarter, the company repurchased shares worth $229 million, which marked the completion of its 2018 capital plan.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
Currently, Ally Financial has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. It comes with little surprise Ally Financial has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.