Ally Financial Inc.ALLY is slated to announce third-quarter 2018 results on Oct 25, before the market opens. Its revenues and earnings are projected to grow year over year.
In the last reported quarter, the company's earnings surpassed the Zacks Consensus Estimate. Results benefited from a marginal increase in revenues and lower provisions. However, an increase in expenses was the headwind.
Moreover, the company boasts an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in all of the trailing four quarters, the average beat being 13.2%.
Ally Financial Inc. Price and EPS Surprise
Ally Financial Inc. Price and EPS Surprise | Ally Financial Inc. Quote
Before we take a look at what our quantitative model predicts for the third quarter, let's check the factors that are expected to impact Q3 results.
Factors to Influence Q3 Results
Management expects used vehicle prices to fall. Thus, lease revenues are projected to decline during the to-be-reported quarter, owing to a smaller lease portfolio as well as lower used vehicle values. Since the company primarily deals in auto loans, this might have a marginal adverse effect on its earnings in the quarter under review.
Nonetheless, given the higher interest rates and Ally Financial's efforts to diversify into the mortgage business, net interest income (NII) is expected to increase in the third quarter.
Notably, the Zacks Consensus Estimate for insurance premiums and service revenue earned is $260 million for the third quarter, reflecting sequential rise of 8.8%. The consensus estimate for net gain on mortgage and automotive loans is $1 million, stable sequentially.
The Zacks Consensus Estimate for non-interest income shows that this component is likely to increase. Its estimate of $381 million for the third quarter represents growth of 4.7% sequentially.
Ally Financial has been making efforts to grow inorganically, introduce products and diversify operations. Given these initiatives, the company is likely to witness an increase in operating expenses during the quarter under review.
Here is what our quantitative model predicts:
Chances of Ally Financial beating the Zacks Consensus Estimate in the third quarter are low. This is because it doesn't have the right combination of the two key ingredients - a positive Earnings ESP and Zacks Rank #3 (Hold) or better - to be confident of an earnings surprise call.
You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Earnings ESP : Ally Financial has an Earnings ESP of -0.99%.
Zacks Rank : Ally Financial currently carries a Zacks Rank #3. While this increases the predictive power of ESP, we also need a positive Earnings ESP to be sure of an earnings beat.
While the Zacks Consensus Estimate for earnings of 80 cents for the to-be-reported quarter has remained unchanged over the past seven days, it reflects a year-over-year improvement of 23.1%.
Further, the Zacks Consensus Estimate for sales for the third quarter is pegged at $1.48 billion, which reflects nearly 1.5% year-over-year growth.
Stocks to Consider
Here are a few stocks that you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.
Franklin Resources, Inc. BEN has an Earnings ESP of +0.68% and a Zacks Rank of 3. The company is slated to release results on Oct 25.
T. Rowe Price Group, Inc. TROW is also scheduled to release results on Oct 25. It has an Earnings ESP of +0.78% and a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Apollo Global Management, LLC APO is slated to release results on Oct 31. It has an Earnings ESP of +17.30% and a Zacks Rank #3.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free reportAlly Financial Inc. (ALLY): Free Stock Analysis ReportFranklin Resources, Inc. (BEN): Free Stock Analysis ReportApollo Global Management, LLC (APO): Free Stock Analysis ReportT. Rowe Price Group, Inc. (TROW): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research