LendingClub Corporation LC is slated to announce second-quarter 2015 results on Aug 4, after the market closes.
Last quarter, LendingClub’s adjusted earnings significantly surpassed the Zacks Consensus Estimate. Results benefited from considerable growth in revenues, partly offset by escalating costs.
Will LendingClub manage to attain profitability yet again this earnings season or will it disappoint? Let's see how things have shaped up for this announcement.
Factors Impacting Q2 Results
LendingClub’s primary source of revenue is transaction fees on loans that it helps to issue, and subsequently lists online for investors to fund. As we expect loan originations to grow in the quarter, the company’s transaction fees should increase as well.
Moreover, the company’s investments in channel diversification and ability to cater affordable credit to a wide spectrum of borrowers will continue to support overall revenue growth. Notably, operating revenues are expected to be in the range of $90–$92 million in the upcoming release. Also, management anticipates adjusted EBITDA to be in the range of $8.5–$10.5 million.
LendingClub seeks to maximize the use of technology to make borrowing cheaper and easier. However, at the same time, the company needs to constantly maintain and upgrade its online platform, thus, increasing technology-related expenses.
Despite minimal overhead costs involved with brick-and-mortar branches, LendingClub incurs significant expenditure for selling and marketing its products. Further, origination and servicing expenses should increase in the quarter, triggered by a rise in loan originations. As a result, overall expenses should trend higher in the quarter and could even hurt the company’s bottom line.
However, LendingClub’s quarterly activities were inadequate to impress analysts. Hence, the Zacks Consensus Estimate for the quarter remained unchanged at a loss of 2 cents per share over the last 7 days.
Earnings Whispers
Our proven model does not conclusively show that LendingClub is likely to beat the Zacks Consensus Estimate in the second quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as you can see below.
Zacks ESP: The Earnings ESP for LendingClub is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 2 cents.
Zacks Rank: LendingClub’s Zacks Rank #1 increases the predictive power of ESP. However, we also need to have a positive ESP to be sure of an earnings beat.
Stocks That Warrant a Look
Here are a few finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.
The Earnings ESP for American Capital, Ltd. ACAS is +8.70% and it has a Zacks Rank #2. The company is slated to report on Aug 5.
Financial Engines, Inc. FNGN has an Earnings ESP of +6.25% and a Zacks Rank #2. It is scheduled to report results on Aug 5.
Walker & Dunlop, Inc. WD has an Earnings ESP of +5.77% and holds a Zacks Rank #1. It is expected to report on Aug 5.
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