We upgraded our long-term recommendation on
CIT Group Inc.
) to Outperform from Neutral based on its efficient capital
Rationale Behind the Upgrade
CIT Group's third-quarter 2013 earnings came in at 99 cents,
beating the Zacks Consensus Estimate by a nickel. The reported
figure also compared favorably with a loss of $1.49 per share in
the year-ago quarter. With this, the company has delivered three
positive earnings surprises in the past four quarters with an
average beat of 19.1%.
Over the last 60 days, the Zacks Consensus Estimate for 2013
declined 1.4% to $3.60 per share. However, the Zacks Consensus
Estimate for 2014 was nearly stable at $4.10 per share over the
same time frame. CIT Group has a Zacks Rank #1 (Strong Buy).
Given CIT Group's stable capital position, we believe that the
company will continue to enhance shareholder value in form of
share buybacks and regular payouts. Moreover, the company has
been consistently lowering its debt burden by either eliminating
or refinancing high-cost long-term debt. Apart from lowering the
funding cost, the initiative continues to aid margin growth.
Further, a steadily improving global economy and advancing
domestic market are expected to increase demand for financing of
inventories and capital equipments, thereby enabling CIT Group to
witness earnings asset growth.
Other Stocks Worth Considering
Other financial service providers worth considering include
Portfolio Recovery Associates Inc.
American Express Co.
Blackhawk Network Holdings, Inc.
). While Portfolio Recovery carries the same Zacks Rank as CIT
Group, American Express and Blackhawk Network Holdings hold Zacks
Rank #2 (Buy).
AMER EXPRESS CO (AXP): Free Stock Analysis
CIT GROUP (CIT): Free Stock Analysis Report
BLACKHAWK NETWK (HAWK): Free Stock Analysis
PORTFOLIO RCVRY (PRAA): Free Stock Analysis
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