LendingClub (LC): What's in Store this Earnings Season?

LendingClub CorporationLC is slated to announce fourth-quarter and 2016 results tomorrow, after market close.

Last quarter, LendingClub reported narrower-than-expected loss. Significant rise in operating expenses was partly offset by higher-than-expected revenues.

Further, the company's shares declined nearly 15% for the three months ended Dec 31, 2016. Also, the company has an average negative earnings surprise of 40% for the trailing four quarters.

LendingClub Corporation Price and EPS Surprise

LendingClub Corporation Price and EPS Surprise | LendingClub Corporation Quote

Earnings Whispers

Will LendingClub's disappointing performance continue this earnings season? Let's check what our quantitative model predicts.

Our proven model doesn't conclusively indicate that LendingClub will beat the Zacks Consensus Estimate in the fourth quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold), for this to happen.

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 LendingClub is 0.00%. This is because both the Most Accurate estimate and Zacks Consensus Estimate are the same.

Zacks Rank: LendingClub's Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be sure of the same.

Notably, the Zacks Consensus Estimate of loss of 9 cents has remained stable over the last seven days.

Factors to Impact Q4 Results

Management expects net loss in the range of $48-$38 million for the quarter.

LendingClub's primary source of revenues is transaction fees on loans that it helps issue and subsequently lists online for investors to fund. As we expect loan originations to rise in the quarter, the company's transaction fees should improve as well.

Also, the company's investments in channel diversification and ability to offer affordable credit to a wide spectrum of borrowers will continue to support overall revenue growth. However, several challenges continue to plague the online lending sector.

These include venture capital funding, interest rate risk and the regulatory landscape. These are likely to have an adverse impact on LendingClub's top-line growth.

Notably, management projects operating revenues in a range of $116-$123 million for the upcoming release. Though the targeted figure is lower than the prior-year quarter's revenues, it is marginally up on a sequential basis.

Moreover, rising expenses remain a major headwind. LendingClub seeks to maximize the use of technology to make borrowing cheaper and easier. However, at the same time, the company needs to constantly maintain and upgrade its online platform, thus increasing technology-related expenses.

Also, the company incurs significant expenditure for selling and marketing its products. For the fourth quarter, LendingClub projects adjusted loss before interest, tax, depreciation and amortization in the range of $15-$5 million.

Stocks that Warrant a Look

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

American International Group, Inc. AIG is scheduled to announce results on Feb 14. The company has an Earnings ESP of +3.23% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

The Earnings ESP for MFA Financial, Inc. MFA is +10.00% and it has a Zacks Rank #3. The company is expected to report on Feb 16.

Moody's Corporation MCO has an Earnings ESP of +3.57% and a Zacks Rank #3. It is scheduled to report on Feb 17.

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Moody's Corporation (MCO): Free Stock Analysis Report

LendingClub Corporation (LC): Free Stock Analysis Report

American International Group, Inc. (AIG): Free Stock Analysis Report

MFA Financial, Inc. (MFA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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