Will Ally Financial (ALLY) Disappoint Again in Q4 Earnings?

Ally Financial Inc.ALLY is slated to announce fourth-quarter and full-year 2016 results on Jan 31, before the market opens.

Last quarter, the company's earnings lagged the Zacks Consensus Estimate due to elevated expenses and a rise in provision for loan losses. Nonetheless, the company witnessed improvement in net revenues.

Following the earnings miss, shares of the company declined nearly 2.3% during the three-months ended Dec 31, 2016.

Also, analysts don't seem to be happy with Ally Financial's business activities in the just concluded quarter, as evident from a 2% fall in earnings estimates over the last 30 days.

Further, Ally Financial does not have a very good earnings surprise history, as evident from the chart below:

Ally Financial Inc. Price and EPS Surprise

Ally Financial Inc. Price and EPS Surprise | Ally Financial Inc. Quote

Earnings Whispers

Our proven model indicates that chances of Ally Financial beating the Zacks Consensus Estimate in the to-be-reported quarter are very low. That's because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as elaborated below.

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 Ally Financial is -2.04%. This is because the Most Accurate estimate of 48 cents is below the Zacks Consensus Estimate of 49 cents.

Zacks Rank : Ally Financial has a Zacks Rank #5 (Strong Sell).

Factors Likely to Influence Q4 Results

Ally Financial's performance is largely dependent on the overall health of the auto industry, as the company primarily deals in auto loans.

A consistent rise in auto loans during the past few months should drive the company's Automotive Finance and Insurance revenues in the fourth quarter. Also, management expects revenue growth to outpace rise in expenses going forward, thereby providing a positive operating leverage.

In addition, Ally Financial's strategies to diversify revenue sources with an effort to improve digital offerings and introduce new products should support top-line growth during the quarter.

However, seasonality might lead to a decline in net interest margin in the to-be-reported quarter.

Ally Financial has been making efforts to grow inorganically, introduce new products and again foray into mortgage business. Given these strategies, the company should witness an increase in operating expenses.

Stocks to Consider

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 in their upcoming releases:

Waddell & Reed Financial, Inc. WDR has an Earnings ESP of +14.63% and carries a Zacks Rank #3. The company is slated to release results on Jan 31.

Evercore Partners Inc. EVR , another Zacks Rank #3 stock, has an Earnings ESP of +4.48%. It is scheduled to report results on Feb 1.

LPL Financial Holdings Inc. LPLA is scheduled to report results on Feb 9. The company has an Earnings ESP of +2.78% and carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

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Ally Financial Inc. (ALLY): Free Stock Analysis Report

Evercore Partners Inc (EVR): Free Stock Analysis Report

LPL Financial Holdings Inc. (LPLA): Free Stock Analysis Report

Waddell & Reed Financial, Inc. (WDR): 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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