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On Deck Capital (ONDK) to Post Q4 Earnings: What's in Store?

Zacks Equity Research

On Deck Capital, Inc. ONDK is scheduled to report fourth-quarter 2018 results on Feb 12, before the market opens. Both revenues and earnings are anticipated to reflect year-over-year improvement.

Before we discuss the factors that could influence the results, let’s take a look at how the company performed in the last reported quarter.

In the third quarter, the company’s adjusted earnings outpaced the Zacks Consensus Estimate. While the previous quarter witnessed higher revenues, an increase in expenses was the undermining factor.

Notably, On Deck Capital delivered positive earnings surprises in all the four trailing quarters, average beat being 109.47%.
 

On Deck Capital, Inc. Price and EPS Surprise

On Deck Capital, Inc. Price and EPS Surprise | On Deck Capital, Inc. Quote

Moreover, activities of the company in fourth-quarter 2018 were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings for the quarter remained unchanged over the last seven days.

Before we take a look at what our quantitative model predicts, let’s check the factors that are expected to influence the fourth-quarter results.

Factors to Impact Q4 Results

On Deck Capital’s primary source of revenues is interest income, which is driven by a rising interest-rate environment. Since loan originations in the fourth quarter were decent, we expect interest income to escalate. Also, the company’s investments in comprehensive technology and services platform, in order to facilitate big banks in providing online lending to small business customers, will likely continue supporting overall revenue growth.

Assuming higher total operating expense, management projects total gross revenues to escalate in 2018 to $392-$396 million, up from $380-$386 million, the impact of which will likely be reflected in the quarter.

Notably, the Zacks Consensus Estimate for sales for the quarter under review is $105.5 million, which indicates year-over-year growth of 20.3%.

The company incurs significant expenses for selling and marketing its products, along with technology and analytics. For the soon-to-be-reported quarter, these expenses might escalate in the current era of digitization and competition.

Management expects adjusted net income of $40-$44 million in 2018, up from $30-$36 million, with the positive impact to be witnessed in the Dec-end quarter.

Earnings Whispers

According to our quantitative model, it cannot be conclusively predicted whether On Deck Capital will be able to beat the Zacks Consensus Estimate in the fourth quarter or not. This is because the stock doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — which is required to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for the stock is currently pegged at -4.48%.

Zacks Rank: On Deck Capital currently has a Zacks Rank #2. While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings beat.

Stocks That Warrant a Look

Here are some other stocks you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.

Bank Of Montreal BMO is expected to release results on Feb 26. The company has an Earnings ESP of +0.30% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ares Capital Corporation ARCC is scheduled to report earnings on Feb 12. It has an Earnings ESP of +1.10% and carries a Zacks Rank #3.

Garrison Capital Inc. GARS has an Earnings ESP of +11.94% and has a Zacks Rank #2. It is set to release quarterly numbers on Mar 5.

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