Ally(US:ALLY) ZACKS·2025-09-08 16:36Core Insights - Ally Financial Inc. (ALLY) shares reached a new 52-week high of $42.46, with an 11.1% increase over the past month, outperforming the industry and major indices [1][10] - The company has been focusing on organic and inorganic growth to enhance revenues, with net financing revenues showing a CAGR of 5.4% over the last five years [4][5] - Despite a projected decline in 2024, net revenues are expected to rebound with a 13.7% growth in 2026, supported by solid origination volumes and restructuring efforts [7][26] Revenue and Growth - Ally Financial's net financing revenues and finance receivables have been a focus area, with the latter declining due to the divestiture of the credit card business [5][6] - The company has streamlined operations by divesting non-core businesses, which is expected to stabilize other revenues in 2025 [6][10] - The Zacks Consensus Estimate for sales indicates a decline of 3.3% this year, but a recovery is anticipated in 2026 [7][11] Financial Position - As of June 30, 2025, Ally Financial had total debt of $19.7 billion and cash equivalents of $10.6 billion, indicating a solid liquidity position [12] - The company has maintained a strong dividend policy, with a 20% hike announced in January 2022 and an annualized growth of 10.4% over the last five years [13][14] - Ally's forward P/E ratio of 8.6X suggests that its shares are undervalued compared to the industry average of 10.57X [15][18] Asset Quality and Risks - Deteriorating asset quality is a concern, with rising provisions for credit losses and net charge-offs expected due to high interest rates and inflationary pressures [19][20] - Management anticipates retail auto net charge-off rates to be between 2.00% and 2.15%, indicating potential credit cost increases [21] - The net interest margin (NIM) is projected to be negatively impacted by the current interest rate environment, with a decline noted from 3.32% in 2023 to 3.27% in 2024 [21][22] Analyst Sentiment - The Zacks Consensus Estimate for 2025 earnings has seen a slight upward revision, while the estimate for 2026 has decreased marginally [23][25] - Projected earnings for 2025 and 2026 indicate significant year-over-year growth of 52.8% and 49.5%, respectively [25][26] Conclusion - Ally Financial's rise in net financing revenues and solid liquidity position are expected to support its financial performance, despite challenges related to asset quality and interest rates [26][27] - The stock is viewed as a cautious investment, with a Zacks Rank of 3 (Hold) indicating a neutral outlook for investors [27]