As you might know, Ally Financial Inc. (NYSE:ALLY) just kicked off its latest third-quarter results with some very strong numbers. The company beat both earnings and revenue forecasts, with revenue of US$1.7b, some 7.5% above estimates, and statutory earnings per share (EPS) coming in at US$1.26, 83% ahead of expectations. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Following the latest results, Ally Financial's 13 analysts are now forecasting revenues of US$7.00b in 2021. This would be a huge 23% improvement in sales compared to the last 12 months. Per-share earnings are expected to bounce 69% to US$3.50. In the lead-up to this report, the analysts had been modelling revenues of US$6.99b and earnings per share (EPS) of US$3.05 in 2021. Although the revenue estimates have not really changed, we can see there's been a decent improvement in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.
There's been no major changes to the consensus price target of US$34.19, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Ally Financial analyst has a price target of US$38.00 per share, while the most pessimistic values it at US$28.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One thing stands out from these estimates, which is that Ally Financial is forecast to grow faster in the future than it has in the past, with revenues expected to grow 23%. If achieved, this would be a much better result than the 2.9% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 8.4% next year. So it looks like Ally Financial is expected to grow faster than its competitors, at least for a while.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Ally Financial following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Ally Financial going out to 2022, and you can see them free on our platform here..
Even so, be aware that Ally Financial is showing 4 warning signs in our investment analysis , you should know about...
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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