We count on CIT Group Inc. (CIT) to beat expectations when it releases fourth-quarter and full year 2014 results on Jan 27, before the market opens.
Why a Likely Positive Surprise?
Our proven model shows that CIT Group is likely to beat earnings because it has the right combination of two key components.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, stands at +5.38%. This is very meaningful and a leading indicator of a likely positive earnings surprise for the company.
Zacks #2 Rank (Buy): Note that stocks with Zacks Ranks #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of CIT Group’s Zacks Rank #2 and an Earnings ESP of +5.38% makes us confident of an earnings beat.
Factors to Drive Q4 Results
With the ongoing steady recovery in the economy and a rise in demand for leases and loans, CIT Group’s non-interest revenues should rise. The growth is expected to be driven by an increase in rental income from operating leases.
However, low rate environment is anticipated to slightly hamper net interest income growth. Nonetheless, CIT Group will benefit from higher non-interest revenues, which will more than offset the strain on interest income. This will likely lead to an overall improvement in top line.
However, as CIT Group continues with its business expansion plans, operating expenses will mount. Notably, the company has been undertaking streamlining initiatives to lower expenses, but these are not expected to be reflected in the upcoming results.
Further, though CIT Group’s credit quality will likely remain strong, provision for credit losses should rise owing to overall growth in loans and leases.
CIT Group’s activities during the quarter were inadequate to win analysts’ confidence. Hence, the Zacks Consensus Estimate remained unchanged at 93 cents per share over the last 7 days.
Other Stocks to Consider
CIT Group is not the only firm looking up this earnings season. We also expect earnings beat from following three other finance companies as well:
Earnings ESP of FleetCor Technologies, Inc. (FLT) is +1.54% and it sports a Zacks Rank #1. The company is expected to release results on Feb 4.
Ladder Capital Corp. (LADR) has an Earnings ESP of +3.45% and a Zacks Rank #1. It is expected to report results on Feb 4.
The Earnings ESP for Ameriprise Financial, Inc. (AMP) is +0.45% and it has a Zacks Rank #3. The company is slated to report on Jan 28.
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