Will CIT Group (CIT) Beat Q3 Earnings on Revenue Growth? - Analyst Blog

We anticipate CIT Group Inc. (CIT) to beat expectations when it reports third-quarter 2014 results on Oct 28, before the market opens.

Why a Likely Positive Surprise?

Our proven model shows that CIT Group is likely to beat earnings because it has the right combination of two key components.

Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, stands at +11.36%. This is very meaningful and a leading indicator of a likely positive earnings surprise for the company.

Zacks #3 Rank (Hold): Note that stocks with Zacks Ranks #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.  

The combination of CIT Group's Zacks Rank #3 and ESP of +11.36% makes us confident of an earnings beat.

Factors to Drive Q3 Results

With the ongoing economic recovery and growing demand from companies for leases and loans, we believe that CIT Group should post strong revenue growth, although low rate environment is expected to hamper the rise in net interest income. Nonetheless, the company should benefit from higher non-interest revenues, driven by a steady increase in rental income from operating leases.

Additionally, CIT Group completed the acquisition of Portsmouth, NH-based Direct Capital Corporation during the quarter. This deal should further augment revenue growth as Direct Capital specializes in small and middle market lending business. Further, the company's credit quality will likely remain strong, with continued fall in provision for credit losses.

However, as CIT Group continues with its business expansion plans, operating expenses will mount. Notably, the company has been undertaking streamlining initiatives to lower expenses, but these are not expected to bear fruits in the upcoming quarter results.

CIT Group's activities during the quarter were inadequate to win analysts' confidence. Hence, the Zacks Consensus Estimate remained stable at 88 cents per share over the last 7 days.

Other Stocks to Consider

CIT Group is not the only firm looking up this earnings season. We also anticipate earnings beat from three other finance companies:

Earnings ESP of JAVELIN Mortgage Investment Corp. (JMI) is +8.89% and it has a Zacks Rank #2. The company is expected to release results on Oct 29.

Ally Financial Inc. (ALLY) has an Earnings ESP of +2.44% and a Zacks Rank #3. It is expected to report results on Oct 29.

Nationstar Mortgage Holdings Inc. (NSM) has an Earnings ESP of +3.81% and a Zacks Rank #3. It is scheduled to report results on Nov 6.