Shares of Ally Financial (ALLY) rallied 6.1% on Tuesday after the company reported better-than-expected Q2 results. The performance of digital financial services company was driven by higher net financing revenue and a fall in provision for credit losses.
The company reported adjusted earnings of $2.33 per share, higher than $1.46 per share estimated by analysts. Notably, it compares favorably with $0.61 recorded in the same quarter last year.
Net revenues of $2.09 billion surpassed the estimates of $1.87 billion, however, compares favorably with $1.61 billion reported in the year-ago period. Net financing revenue was $1.55 billion, up $493 million year-over-year, driven by lower funding costs, higher retail auto revenue and gains on off-lease vehicles.
Ally Financial’s auto finance segment benefitted from 79.2% growth in consumer auto originations from the prior-year period. Also, the insurance segment witnessed a rise in written premiums, driven by higher consumer products volume and rate. (See Ally Financial stock chart on TipRanks)
Provision benefit of $32 million was recorded on the back of strong performance and favorable macroeconomic trends.
On July 13, Jefferies analyst John Hecht reiterated a Buy rating on the stock and assigned a price target of $60 (17.9% upside potential).
Hecht said, “Fundamentals remain strong with better volumes and stronger credit performance. Given its more liability sensitive balance sheet, we consider the current rate environment to be more favorable for ALLY than other banks/spec fin co’s.”
Consensus among analysts is a Strong Buy based on 8 unanimous Buys. The average Ally Financial price target stands at $62.88 and implies upside potential of 23.5%.
TipRanks data shows that financial blogger opinions are 100% Bullish on ALLY, compared to the sector average of 70%.