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What to Expect From Santander Consumer's (SC) Q4 Earnings?

Zacks Equity Research

Santander Consumer USA Holdings Inc. SC is scheduled to report fourth-quarter and full-year 2017 results on Jan 31, before market open. While its earnings for the quarter are projected to grow year over year, revenues are expected to decline.

Last quarter, the company’s earnings surpassed the Zacks Consensus Estimate. Higher total finance and other interest income were recorded.

Moreover, the company has a decent earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 2.8%.

However, activities of the company in the fourth quarter failed to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of 32 cents remained stable over the last 30 days. However, the figure reflects growth of 88.2% year over year.

Notably, Santander Consumer USA’s price performance has been quite impressive. Its shares have gained 37.9% in 2017, outperforming the growth of 6.9% for the industry it belongs to.

Santander Consumer USA Holdings Inc. Price and EPS Surprise
 

Santander Consumer USA Holdings Inc. Price and EPS Surprise | Santander Consumer USA Holdings Inc. Quote

Will the rally in stock price continue post Q4 earnings release? It depends on the company’s ability to impress the market with an earnings beat and improved financials.

Let’s take a look at what our quantitative model predicts.

Earnings Whispers

According to our quantitative model, it cannot be conclusively predicted if Santander Consumer USA will be able to beat the Zacks Consensus Estimate this time around. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — for increasing 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.

Zacks ESP: The Earnings ESP for Santander Consumer USA is 0.00%.

Zacks Rank: Santander Consumer USA sports a Zacks Rank #1 (Strong Buy), which increases the predictive power of ESP. However, we also need a positive ESP to be confident of an earnings beat.

Factors to Influence Q4 Results

Management expects net finance and other interest income to decline 5%-7% sequentially, primarily due to TDR interest accruals, lower balances and seasonality. Moreover, after adjusting for the gain on sale of the RV/Marine portfolio, other income is expected to fall by $70-$90 million in the quarter. Thus, total revenues are likely to be lower in the quarter.

In fact, the Zacks Consensus Estimate for sales is $1.58 billion for the quarter, which reflects a decline of 3% year over year.

However, management expects operating expenses to decline slightly on a sequential basis.

Driven by improving credit performance, partially offset by higher seasonal losses, provision expenses are expected to be flat to $40 million lower compared with the prior quarter.

Stocks that Warrant a Look

Here are a few 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.

Apollo Global Management, LLC APO is scheduled to report results on Feb 1. It has an Earnings ESP of +3.61% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lazard Ltd. LAZ is also slated to report results on Feb 1. It has an earnings ESP of +2.17% and a Zacks Rank #3.

Eaton Vance Corporation EV is expected to report results on Feb 28. It has an Earnings ESP of +0.64% and a Zacks Rank of 2.

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