Tuesday, Jefferies raised the price target for Ally Financial (NYSE: NYSE:ALLY) shares to $40 from $36, while maintaining a Hold rating on the company. The adjustment follows updated guidance from Ally Financial's management, which led to an increase in the second quarter 2024 diluted adjusted earnings per share (EPS) forecast from $0.60 to $0.63.
The firm noted that both Net Interest Margin (NIM) and Other Revenue are expected to be at the high end of the full-year 2024 guidance range. However, Net Charge Offs (NCOs) were also projected to be at the higher end.
Despite this, the expectation is for auto loan delinquency rates to continue their year-over-year decline. The forecast for the second quarter auto delinquency rate is set at 4.06%, which is a 46 basis points increase year-over-year but shows a decline from the previous quarter’s 64 basis points increase year-over-year.
The revision in the price target is attributed to the increased likelihood of NIM expansion, which is anticipated due to stability in interest rates and deposit costs. Following these adjustments, Jefferies also revised its full-year 2024 and 2025 EPS forecasts for Ally Financial.
The new estimates are raised from $2.90 to $3.09 for 2024, and from $5.46 to $5.65 for 2025. These revised forecasts reflect the firm's expectations based on the current financial trends and market conditions affecting Ally Financial.
In other recent news, Ally Financial reported stronger-than-anticipated first-quarter revenue of $2 billion. Analyst firms have been active in their assessments of the company.
JPMorgan (NYSE:JPM) revised its rating for Ally Financial's stock from Underweight to Neutral, acknowledging improved performance metrics. Meanwhile, BTIG reiterated its Buy rating on Ally Financial, maintaining a positive outlook based on potential for upside in the company's future earnings.
Citi initiated coverage on Ally Financial with a Buy rating, citing the company's potential for effective management in a "soft landing" economic scenario. However, Wells Fargo (NYSE:WFC) maintained an underweight rating, highlighting potential negative auto credit impacts. In addition to these ratings, Ally Financial successfully navigated the Federal Reserve's annual stress test, demonstrating resilience against potential downturns.
These recent developments highlight the evolving financial landscape for Ally Financial, as it continues to adapt and maintain a significant presence in the financial sector. Analyst firms' assessments and the company's successful navigation of the Federal Reserve's stress test provide valuable insights for investors.
InvestingPro Insights
Following Jefferies' updated outlook on Ally Financial, real-time data from InvestingPro reinforces the company's robust performance. Ally Financial is trading near its 52-week high with a recent price close of $40.5, reflecting a strong market confidence as indicated by a significant 58.04% one-year price total return. In line with Jefferies' price target raise, the company's fair value, as assessed by analysts, stands at $45.5, suggesting further upside potential. Moreover, Ally Financial's commitment to shareholder returns is evident through its consistent dividend payments over the past nine years, with a current dividend yield of 2.96%.
InvestingPro Tips highlight that Ally Financial has been profitable over the last twelve months and analysts predict the company will maintain profitability this year. These insights, complemented by a solid return on assets of 0.44% for the same period, present a picture of a company with a stable financial foundation. For investors looking to delve deeper into Ally Financial's performance and gain additional insights, there are several more InvestingPro Tips available. By using the promo code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, which includes access to these valuable tips.
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