Stock Alert for CIT Group Inc. ($CIT)
  • Stock Alert for CIT Group Inc. (CIT)
  • Stock Alert for CIT Group Inc. (CIT)
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    Stock Alert for CIT Group Inc. (CIT)

    CIT Group Inc. (NYSE: CIT)

    CIT Group Inc. (CIT) is a bank holding company providing commercial financing and leasing products, and management advisory services to clients in a variety of industries. CIT operates primarily in North America, with locations in Europe, Latin America, Australia and the Asia-Pacific region. CIT bank is its primary bank subsidiary. The Company provides financing and leasing capital to its clients and their customers in more than 30 industries and 50 countries. It serves clients in a variety of industries, including transportation, aerospace and rail, manufacturing, wholesaling, retailing, healthcare, communications, media and entertainment, and various service-related industries. The Company operates through five segments: Corporate Finance, Transportation Finance, Trade Finance, Vendor Finance and Consumer Finance. In November 2009, the Company filed for bankruptcy. In December 2009, CIT emerged from bankruptcy.

    The Company was founded in 1908 and is headquartered in New York, New York.

    Share Statistics (4-Jun-10) FY

    2007

    FY

    2008

    %

    Chg

    Q4 2008 Q4 2009 %

    Chg

    Symbol CIT Revenue, $Mn 8.61B 1.38B 78.7% n/a 931.3M n/a
    Current price $36.46 Gross marg. 45.1% 44.0% 2.4% n/a -62.1% n/a
    52wk Range: $42.94-24.83 Oper. margin 14.0% -17.6% 225.7% n/a 328.3% n/a
    Avg Vol (3m): 2,565,320 Net margin 10.2% -10.3% 200.9% n/a 341.2% n/a
    Market Cap. 7.29B
    Dil. Shares Outst. 200.0M EPS, $ -0.58 -2.74 -68.2% n/a 1.16 n/a

    Source: Reuters.com, SEC Filings.

    Financial Summary

    CIT recently reported net income for the quarter ended March 31, 2010, of $97 million, $0.49 per share.

    Total assets declined nearly $2 billion from year-end to $58.1 billion driven by a reduction in finance and leasing assets as cash collections and asset sales were partially offset by a modest level of loan and lease originations.

    Assets held for sale increased by $1 billion, largely reflecting CIT’s decision to sell certain non-strategic Vendor Finance assets outside the United States and student lending receivables.

    Preliminary Tier 1 and Total Capital ratios improved to 15.5% and 15.8% from 14.2% at December 31, 2009, as risk-weighted assets declined and common equity increased.

    Net income included pre-tax net accretion and lower depreciation of $421 million resulting from fresh start accounting (“FSA”) balance sheet adjustments recorded in December 2009.

    Net finance revenue as a percentage of average earning assets was 4.09%, which includes a 3.55% benefit from the net accretion and lower depreciation.

    Non-spread revenue benefitted from gains on loan and asset sales, which were partially offset by losses on unhedged foreign currency positions.

    Operating expenses declined from fourth quarter’s core operating expense level. The current quarter includes $12 million for restructuring as CIT continues to take actions to better align costs with its smaller balance sheet.

    Credit

    Overall credit performance was within expectations. Non-accrual loans, after FSA, increased from year-end levels reflecting some deterioration in Vendor Finance and Transportation Finance. Net charge-offs were modest at $42 million, as loans had been written down at year-end to estimated fair values. Excluding FSA, charge-offs were $233 million, 2.40% of receivables, significantly lower than recent quarters.

    The provision for loan losses reflects the re-establishment of certain reserves eliminated in FSA and some deterioration on loans discounted in FSA. The provision includes $37 million for reserves on new originations (including Trade Finance – $27 million) and $74 million for re-establishing reserves on performing loans. Provisions also were made for reserves of $33 million on impaired loans and $42 million was provided for charge-offs in excess of existing discounts.

    At March 31, 2010, the $181 million reserve for credit losses reflects the provisioning above less charge-offs and also includes $40 million of reserves for securitized loans brought on-balance sheet in conjunction with a new accounting pronouncement (no provision or income statement impact).

    Operating Highlights

    New loan and lease volumes, excluding factoring, declined modestly from the prior quarter to $0.9 billion. Vendor Finance programs began to expand with volume totaling $0.5 billion, and CIT took delivery of four airplanes valued at $0.2 billion.

    Corporate Finance credit metrics began to stabilize. Net charge-offs, before the benefit of non-accretable discounts, were 3.55% of finance receivables, improving from 5.96% in the prior quarter. Corporate Finance selectively resumed originating loans in CIT Bank.

    Vendor Finance signed new vendor relationships and successfully returned to the capital markets by executing term and conduit asset-backed financings.

    Transportation Finance aerospace fleet was fully utilized, as CIT placed all new aircraft deliveries and re-leased all aircraft upon their lease expiration. Rail fleet utilization was essentially unchanged at 90%.

    Trade Finance factoring volume declined from the fourth quarter, reflecting seasonality and some residual impact of prior year client terminations. CIT resumed factoring for certain clients that had previously withheld business.

    Liquidity and Financing

    Total cash increased to $10.0 billion, and consisted of $5.5 billion of cash available to repay debt at the bank holding company, $1.5 billion at CIT Bank, $1.5 billion at operating subsidiaries and $1.5 billion in other restricted cash.

    During the quarter, the Company prepaid $750 million of high cost first lien debt and $731 million of secured rail financing using available cash resources. CIT completed a $667 million private placement equipment finance securitization (principally vendor finance assets), and re-established a $1.0 billion vendor finance conduit facility. Weighted average funding costs for these two financings approximates 3.0%.

    As a result of improved liquidity, cash flows from CITs portfolio and the success of financing initiatives, the Company intends to make an additional $1.5 billion prepayment of first lien debt to lower its cost of capital and increase finance margins.

    CIT ended the quarter with very strong capital and liquidity. The total capital ratio was 47.7% with total leverage at 17.7%. Total deposits were $4.9 billion, down from year-end.

    Financial Strength (4-Jun-2010) Company Industry Sector S&P 500
    Quick Ratio (MRQ) 0.00 3.35 0.80
    Current Ratio (MRQ) 0.00 6.19 0.96
    Long-Term Debt to Equity (MRQ) 485.11 72.39 90.57 133.93
    Total Debt to Equity (MRQ) 485.76 241.03 226.06 200.08

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    Buy Outperform Hold Underperform Sell No Opinion

    This is the consensus forecast amongst five polled investment analysts. Against the CIT Group Inc company.

    Analyst Detail Buy Outperform Hold Underperform Sell No Opinion
    Latest 2 1 2 0 0 0
    4 weeks ago 2 1 2 0 0 0
    2 months ago 2 1 2 0 0 0
    3 months ago 2 1 1 0 0 0
    Last year 1 2 7 0 0 0

    The four analysts offering 12-month price targets for CIT have a median target of 44.50, with a high estimate of 46.00 and a low estimate of 43.25. The median estimate represents a 20.27% increase from the last price of 37.00.

    Source: www.ft.com

    Consensus Estimates Analysis

    # of Estimates Mean High Low 1 Year Ago
    SALES (in millions)
    Year Ending Dec-10 1 954.10 954.10 954.10 1,943.59
    Year Ending Dec-11 1 1,545.80 1,545.80 1,545.80
    EARNINGS (per share)
    Quarter Ending Jun-10 4 0.22 0.59 -0.02 -0.41
    Quarter Ending Sep-10 4 0.43 0.80 0.10 -0.31
    Year Ending Dec-10 4 1.57 2.86 0.69 -0.85
    Year Ending Dec-11 4 2.74 4.03 0.23
    LT Growth Rate (%) 1 12.50 12.50 12.50 11.75

    Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=CIT

    Investment Highlights

    CIT recently announced the appointment of Nelson J. Chai as executive vice president, chief administrative officer and head of strategy. He will report directly to chairman and CEO John A. Thain.

    Chai will have responsibility for CIT’s global infrastructure and operating architecture including its technology platforms. He will also lead the Company’s strategic planning, business development and sales activities, as well as the insurance and consumer finance divisions.

    Prior to CIT, Chai served as executive vice president and CFO of Merrill Lynch & Co. Inc. Before this, he was executive vice president and CFO of NYSE Euronext (NYSE: NYX) and its predecessor company NYSE Group Inc., and was CFO of Archipelago Holdings.

    Chai is a board member of the U.S. Fund for UNICEF.

    CIT also recently announced the appointment of Robert C. Rowe as executive vice president and chief credit officer.

    Rowe’s primary responsibilities will include overseeing the transaction approval process across CIT’s four operating segments, setting credit policy and overseeing the Company’s workout/special assets function. He will also ensure the regular review, adherence to, and effective communication of credit policy and procedures across all levels of CIT.

    Rowe most recently served as Senior Credit Officer – Commercial Banking of FirstMerit Bank. He previously served as chief credit officer of National City Bank after spending 20 years in various roles of increasing responsibility in their Corporate Banking and Credit departments. While at National City he also served as division head of the Equity Sponsor Group and had transaction approval responsibility for various segments that included Leveraged Finance and Asset Based Lending. Before National City, he served as account officer and assistant treasurer of Irving Trust (now Bank of New York Mellon).

    Source: http://www.cit.com/index.htm

    Technical Analysis

    Source: http://stockcharts.com

    CIT is below its 50-day moving average. This bearish sign is even more significant because the moving average is also trending lower.

    CIT is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

    CIT’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below zero, which suggests that the underlying moving averages are bearish.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Jun4-2010 symbol Share, $ $ Mn 2010 2011 2010 2011
    SunTrust Banks Inc. STI 25.80 12.90B n/a n/a 1.62 n/a
    TCF Financial Corp. TCB 16.13 2.29B 25.78 n/a 1.96 n/a
    GATX Corp. GMT 27.92 1.29B 18.49 n/a 1.13 n/a
    Regional Banks Median 5.49M 22.13 n/a 1.57 n/a
    CIT Group Inc. CIT 36.46 7.29B 24.08 n/a 1.84 n/a

    Source: Thomson Financial

    Insider Trading Activity

    NET SHARES PURCHASE ACTIVITY

    Inside Purchases – Last 6 Months

    Shares Transaction
    Purchases 14,700 2
    Sales n/a 0
    Net Shares Purchased (Sold) 14,700 2
    Total Insider Shares Held 50.01K n/a
    % Net Shares Purchased (Sold) 40.9% n/a

    Net Institutional Purchases — Prior Qtr to Latest Qtr
    Shares
    Net Shares Purchased (Sold) 14,247,100
    % Change in Institutional Shares Held 7.6%

    Source: Yahoo Finance

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