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Wedbush Upgrades OneMain On Q2 EPS Beat, Decline In NCO Ratio

Priya Nigam

OneMain Holdings Inc (NYSE: OMF) reported its second-quarter EPS handsomely ahead of expectations, along with a decline in its net charge-off ratio ratio.

OneMain Holdings should be able to manage the CECL (Current Expected Credit Losses) complexities and the $2 per share special declared at the earnings release is a clear sign of the company’s excess capital generation, according to Wedbush.

The Analyst

Wedbush’s Henry Coffey upgraded OneMain Holdings from Neutral to Outperform, while raising the price target from $35 to $45.

The Thesis

OneMain reported quarterly GAAP EPS at $1.42, significantly above Wedbush’s estimate of $1.39 and consensus of $1.34. The results were driven by higher-than-expected loan growth and slightly lower provision and operating costs, Coffey said in the note.

Originations grew 21% to $3.9 billion in the quarter, with the share of secured loans increasing to 50% of volume, from 44% in the same quarter last year. Loan yields came in at 24.2%, representing an improvement both sequentially and on a year-on-year basis, Coffey noted.

He highlighted the decline in the company's net charge-off ratio as an important development in the quarter. The NCO ratio declined from 6.6% of average loans in the year-ago period to 6.2%, along with lower delinquencies.

Price Action

Shares of OneMain Holdings traded higher by more than 12% to $40.40 on Tuesday morning.

Latest Ratings for OMF

Date Firm Action From To
Jul 2019 Upgrades Neutral Outperform
Jul 2019 Upgrades Neutral Overweight
May 2019 Downgrades Outperform Neutral

View More Analyst Ratings for OMF
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