A Preview Of Ally Financial's Q2 Earnings From Barclays

Ally Financial Inc ALLY is scheduled to report its 2Q16 results on July 26. Barclays’ Jason M. Goldberg maintained an Overweight rating on the company, with a price target of $23. The analyst expects the results to reflect continued balance sheet growth, a slightly higher net interest margin and higher fee income, among others, relative to the prior quarter.

Q2 Earnings Preview

The operating EPS estimate for 2Q16 has been raised by $0.03 to $0.52, in-line with the consensus expectation of $0.52. The increase reflects seasonally lower provision expenses and higher net interest margins, analyst Jason Goldberg mentioned. The EPS estimate for 2016 has been reduced, however, by $0.05 to $2.25, reflecting continued loan loss reserve builds.

“Importantly, we expect results to continue to exhibit relatively stable auto originations, driven by its 'growth channels' and behaved asset quality (with a seasonal benefit for auto NCOs) though continued loan loss reserve building (more loans, less lease),” the analyst wrote.

Ally Financial has projected 15 percent EPS growth this year. Although the company would be helped by lower preferred dividends, it’s still to be seen whether the recent slowdown in auto sales and the current interest rate outlook would impact its view, Goldberg mentioned.

“We believe active share repurchase could play an important role and look forward to hearing about the expected timing of its 9% share repurchase program given its current valuation,” the analyst added.