Wednesday, July 29, 2015

CIT Group Q2 Earnings Report.

CIT Group reported earnings 7/28/15 and was in-line in EPS with the street estimates of $.66, and missed on revenue by posting 406.6M, which was off by 28.37M.  CIT Group missed on my estimate of EPS of $.78. The OneWest acquisition will be occurring on August 3rd. This provides a catalyst for CIT Group to make additional interest income. Expenses have increased 10M, and also earning assets have increased .9B. The increase of expenses was mainly due to the pending acquisition.  CIT Group is continuing to set itself up for a high interest rate environment. The synergies achieved by buying OneWest will strengthen the likelihood of CIT Group achieving my price target of $55.18. CIT Group stock price acted negatively to these earnings, and is now under the buy in price. Look for CIT Group to manage their costs over the third quarter, and this could be achieved by the synergies of OneWest and CIT group. By doubling the size of CIT Group’s bank branch, they are able to lower funding costs, and they add 70 branches to their commercial banking branch.

CIT Group’s transportation business is performing well, by having 98% of railcars being utilized, and 97% of aircraft being used. Aircraft lending in Asia has been growing at a constant pace and CIT has been continuing to partner with Century Tokyo Leasing.  The middle market banking activity is doing sub-par due to low M&A activity occurring in the middle markets.  CIT Group is trading today at $45.42

No comments: