A month has gone by since the last earnings report for Ally Financial (ALLY). Shares have lost about 2.9% 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’s fourth-quarter 2024 adjusted earnings of 78 cents per share handily surpassed the Zacks Consensus Estimate of 59 cents. Also, the bottom line reflected a jump of 95% from the year-ago quarter.
Results benefited from a rise in net finance revenues. Further, lower expenses and a decline in credit costs provided support. However, lower other revenues and a decline in net finance receivables and loans and deposits were the undermining factors.
After considering non-recurring items, net income available to common shareholders (GAAP basis) was $81 million, up significantly from $35 million in the prior-year quarter.
For 2024, adjusted earnings per share was $2.35, which outpaced the consensus estimate but declined 17.3% year over year. Net income available to common shareholders (GAAP basis) was $558 million, down 34.1%.
Total quarterly GAAP net revenues were $2.03 billion, down 2.4% from the prior-year quarter. Also, the top line missed the Zacks Consensus Estimate of $2.07 billion.
For 2024, total GAAP net revenues were $8.18 billion, down marginally. The top line, however, surpassed the consensus estimate of $8.15 billion.
Net financing revenues grew marginally from the prior-year quarter to $1.51 billion. The rise was primarily driven by lower funding costs. Further, the adjusted net interest margin was 3.33%, up 11 basis points. Our estimate for net financing revenues was $1.48 billion.
Total other revenues were $517 million, down 9.9%. We projected other revenues of $603.2 million.
Total non-interest expenses decreased 4% year over year to $1.36 billion, reflecting a disciplined approach to expense management. Our estimate for expenses was $1.24 billion. Excluding repositioning-related charges, adjusted expenses declined almost 1% to $1.22 billion.
The adjusted efficiency ratio was 52.8%, down from 55.4% in the year-ago period. A fall in the efficiency ratio indicates an improvement in profitability.
As of Dec. 31, 2024, total net finance receivables and loans amounted to $132.3 billion, down 1.1% from the prior quarter. Our estimate for the metric was $136.6 billion.
Deposits declined marginally to $151.6 billion. We projected deposits of $151.2 billion.
Non-performing loans were $1.48 billion as of Dec. 31, 2024, up 6.6% year over year. Our estimate for the metric was $1.34 billion.
In the reported quarter, Ally Financial saw net charge-offs of $543 million, down 12.8% from the prior-year quarter. We had projected net charge-offs of $586.8 million.
The company reported a provision for loan losses of $557 million, down 5.1%. The fall was attributable to the lower Corporate Finance reserve build and the sale of Ally Lending. Our estimate for provisions was $642.2 million.
As of Dec. 31, 2024, the total capital ratio was 13.2%, up from 12.4% in the prior-year quarter. The tier 1 capital ratio was 11.3%, up from 10.8% as of Dec. 31, 2023.
Also, the common equity tier 1 (CET1) capital ratio of 9.8% grew from 9.4% in the prior-year quarter.
The company expects NIM to be in the 3.40-3.50% range, up from 3.30% in 2024.
Average earning assets are expected to be stable.
Adjusted other revenues are expected to remain flat compared with $2.17 billion in 2024. This is attributable to the sale of the Credit Card business and the cessation of mortgage originations.
Adjusted expenses are expected to be stable compared with $5.03 billion in 2024. The workforce reduction as part of its business simplification efforts will likely drive expenses.
The company expects loan losses to increase in the first half of 2025. Retail auto NCO rates are projected to be between 2.00% and 2.25%, and consolidated NCOs rates are likely to be in the range of 1.35-1.50%.
The tax rate is expected to be between 22% and 23%.
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -8.54% due to these changes.
At this time, Ally Financial has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ally Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Ally Financial is part of the Zacks Financial - Consumer Loans industry. Over the past month, Capital One (COF), a stock from the same industry, has gained 0.7%. The company reported its results for the quarter ended December 2024 more than a month ago.
Capital One reported revenues of $10.19 billion in the last reported quarter, representing a year-over-year change of +7.2%. EPS of $3.09 for the same period compares with $2.24 a year ago.
Capital One is expected to post earnings of $3.66 per share for the current quarter, representing a year-over-year change of +14%. Over the last 30 days, the Zacks Consensus Estimate has changed -6.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Capital One. Also, the stock has a VGM Score of B.
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