On Tuesday, TD Cowen maintained a Hold rating on Ally Financial (NYSE: NYSE:ALLY) shares, with a steady price target of $38.00. The financial services company recently reported an adjusted earnings per share (EPS) of $0.95, surpassing TD Cowen's estimate of $0.59 and the Financial Sector (FS) consensus of $0.52.
A significant portion of this earnings beat, $0.21, was attributed to an adjustment in the tax rate, while the remainder was due to provisions exceeding pre-provision net revenue (PPNR).
Ally Financial's credit metrics have shown further seasoning since the last update, with the retail auto net charge-off (NCO) rate reaching 2.24%, which is above TD Cowen's estimate of 2.00%. Despite this, Ally's management has reaffirmed its targets for a 4% net interest margin (NIM) and long-term return on equity (ROE).
The analyst noted that while the company meets its NIM and ROE goals, the near-term earnings risk is elevated due to credit and margin headwinds. The recent financial performance of Ally Financial reflects these challenges, yet the firm's price target suggests a neutral outlook on the stock's potential movement.
In other recent news, Ally Financial demonstrated a strong performance in its third-quarter earnings report, with an adjusted earnings per share (EPS) of $0.95, a figure significantly influenced by tax credits from electric vehicle leases. Despite a challenging economic environment, the company managed to originate $9.4 billion in consumer loans in its auto segment. However, retail deposits saw a decline of $600 million in the quarter.
Janney, Citi, and Barclays have all maintained positive ratings for Ally Financial, despite Janney reducing their price target from $40 to $39. Raymond James, on the other hand, upgraded their rating from Underperform to Market Perform, suggesting that the stock has already experienced most of its underperformance. Meanwhile, BTIG reiterated a neutral stance, citing concerns about the company's credit trends and net interest margins.
Ally Financial also announced a quarterly dividend of $0.30 for Q4 2024, and its insurance segment reached a record $384 million in premiums. Electric vehicle lease originations accounted for 12% of total origination volume, indicating the company's progress in recent developments. These updates reflect the company's ongoing efforts to navigate the current economic environment through disciplined capital deployment and expense management.
InvestingPro Insights
Ally Financial's recent financial performance, as discussed in the article, can be further contextualized with current market data and expert insights. According to InvestingPro, Ally's P/E ratio stands at 13.7, with an adjusted P/E ratio of 11.98 for the last twelve months as of Q3 2024. This relatively low valuation might be reflecting the market's concerns about the company's near-term earnings risks, as mentioned by TD Cowen.
InvestingPro Tips highlight that Ally has maintained dividend payments for 9 consecutive years, which could be appealing to income-focused investors despite the current challenges. However, it is worth noting that 11 analysts have revised their earnings downwards for the upcoming period, aligning with TD Cowen's cautious stance on near-term earnings risks.
The company's price has fallen significantly over the last three months, with a -16.76% total return, which correlates with the analyst's observations about credit and margin headwinds. Despite these challenges, InvestingPro Tips indicate that analysts predict the company will be profitable this year, and Ally has indeed been profitable over the last twelve months.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips for Ally Financial, providing a deeper understanding of the company's financial health and market position.
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