Ally Financial Inc. Just Reported Earnings, And Analysts Cut Their Target Price
It's been a mediocre week for Ally Financial Inc. (NYSE:ALLY) shareholders, with the stock dropping 11% to US$25.39 in the week since its latest full-year results. The result was positive overall - although revenues of US$6.3b were in line with what analysts predicted, Ally Financial surprised by delivering a statutory profit of US$4.34 per share, modestly greater than expected. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent statutory forecasts to see whether analysts have changed their earnings models, following these results.
See our latest analysis for Ally Financial
Taking into account the latest results, the current consensus from Ally Financial's eleven analysts is for revenues of US$6.71b in 2020, which would reflect a credible 7.1% increase on its sales over the past 12 months. Statutory earnings per share are expected to shrink 5.8% to US$4.12 in the same period. In the lead-up to this report, analysts had been modelling revenues of US$6.71b and earnings per share (EPS) of US$4.14 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
With no major changes to earnings forecasts, the consensus price target fell 7.6% to US$35.68, suggesting that analysts might have previously been hoping for an earnings upgrade. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Ally Financial analyst has a price target of US$39.00 per share, while the most pessimistic values it at US$32.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
In addition, we can look to Ally Financial's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. For example, we noticed that Ally Financial's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow at 7.1%, well above its historical decline of 2.9% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 11% per year. So although Ally Financial's revenue growth is expected to improve, it is still expected to grow slower than the market.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. Analysts also downgraded their price target, suggesting that the latest news has led analysts to become more pessimistic about the intrinsic value of the business.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Ally Financial analysts - going out to 2022, and you can see them free on our platform here.
You can also view our analysis of Ally Financial's balance sheet, and whether we think Ally Financial is carrying too much debt, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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