Balanced Risk-Reward for CIT Group - Analyst Blog

On Jun 13, 2014, we issued an updated research report on CIT Group Inc. CIT. Though the company reported lower-than-expected first-quarter 2014 results, its strong balance sheet position and steady capital deployment activities remain impressive.

CIT Group had recommenced dividend payout and share repurchases in 2013 following the termination of its agreement with the Federal Reserve Bank of New York (which restrained the company from deploying capital without prior approval). Further, given the stable capital and liquidity positions, we believe that CIT Group will continue to enhance shareholders' value going forward.

Additionally, CIT Group has been restructuring its business operations given the changing operating environment. Apart from re-organizing its segments, the company continues to divest its Non-Strategic Portfolios. Upon completion, these initiatives are expected to aid reduction of operating expenses.

However, CIT Group reported dismal first-quarter results owing to a significant decline in net interest income and higher-than-expected provision for credit losses. These were partially offset by a rise in non-interest income and lower operating expenses.

The disappointing results triggered a downward revision in the Zacks Consensus Estimate, as analysts became more bearish on CIT Group's future performance. Over the past 60 days, the Zacks Consensus Estimate for 2014 decreased 19.4% to $3.16 per share and for 2015, the Zacks Consensus Estimate fell 8.9% to $3.97 per share over the same time frame.

CIT Group currently has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked banking stocks include ORIX Corporation IX, Euronet Worldwide Inc. EEFT and Ladder Capital Corp LADR. All these sport a Zacks Rank #1 (Strong Buy).