Ally Financial Pops on Q4 Earnings Beat and $2 Billion Buyback

Over the past month, the financial services sector has been the worst performer in the S&P 500, down 2.99%. Over the past six months, its paltry 1.26% gain ranks second-worst. 

But as Q4 earnings season begins in earnest, bank stocks are already demonstrating the sector’s long-term value as earnings beats and strong forward guidance aim to reinvigorate investor confidence.    

Such was the case when online bank Ally Financial (NYSE: ALLY) reported Q4 and full-year financials on Wednesday, Jan. 21, with the market reacting positively and pushing shares nearly 7% higher. 

Ally Reports Record Q4 Earnings Growth

When Ally posted Q4 earnings, it announced earnings per share (EPS) of $1.09, which beat the consensus estimate of $1.02, and quarterly revenue of $2.17 billion—good for a 4.8% year-over-year (YOY) increase and better than analyst expectations of $2.15 billion.

Ally’s 2025 full-year results saw adjusted total net revenue of $8.5 billion and core pre-tax income of $1.6 billion. 

In the company’s earnings call, CEO Michael Rhodes also noted that the company generated $1.5 billion in written insurance premiums—a record for Ally—alongside YOY EPS growth of 62%, also a record. 

The EPS growth was welcome news for shareholders who had endured annualized earnings contractions of -38.81%, -44.93%, and -35.02% in 2022, 2023, and 2024, respectively. 

In part, 2025’s strong EPS growth was attributed to record consumer auto applications, of which the company saw 3.8 million in Q4, equating to $10.8 billion in loan origination. Annually, that last figure was about $43.7 billion, up 11% YOY. 

Icing the cake, the financial services firm announced that it authorized a $2 billion share buyback program and issued 2026 full-year guidance that included 5% revenue growth. 

Rhodes noted that Ally “ended the year with $144 billion in retail deposit balances, reinforcing our position as the largest all-digital direct bank in the United States,” adding that the bank “now serve[s] 3.5 million customers as 2025 marked our 17th consecutive year of customer growth.” 

With a trailing EPS of $1.66 and a trailing 12-month price-to-earnings (P/E) Ratio of 25.52, Ally Financial's earnings are expected to grow an eye-catching 53.22% next year, from $3.57 to $5.47 per share.

Ally’s Dividend Pays Investors to Patiently Wait for the Upside 

The average 12-month price target of $49.44 for ALLY implies nearly 17% potential upside. However, with a forward P/E of just 11.88, the stock is increasingly looking like a value opportunity.

Also, as is the case with most financial institutions, Ally pays a dividend to patient shareholders. 

Currently, that dividend pays $1.20, or 2.83 per share annually based on today’s price. While Ally’s dividend payout ratio of more than 72% may raise some concerns, the company boasts a five-year annualized dividend growth rate of 12.03%, suggesting the payment is reliable.

The next quarterly payment of 30 cents per share is scheduled for Tuesday, Feb. 17, to investors of record before the ex-dividend date of Monday, Feb. 2.

What Wall Street Thinks About Ally Financial?  

So far in January, Ally Financial has been upgraded by Evercore, Wells Fargo, and Bank of America to Outperform, Overweight, and Buy, respectively. 

The investment banks cited improving credit trends and confidence in Ally’s improving net interest margin—the difference between the interest earned on investments and on loans, and in the interest paid on deposits and debt. 

Of the 18 analysts covering ALLY, 13 assign the stock a Buy rating, five assign it a Hold, and none assign it a Sell. Overall, it receives a Moderate Buy rating. 

According to TradeSmith, the stock’s financial health falls into the Green Zone, where it has been for more than three months. Meanwhile, institutional ownership remains above average at nearly 89% with inflows of $2.46 billion easily outpacing outflows of $1.62 billion over the past 12 months. 

Current short interest stands at 3.5%, or just over 308,000 shares out of the 10.7 million shares outstanding. 

Notably, Ally Financial scores higher than 99% of the companies evaluated by MarketBeat and ranks 25th out of 907 stocks in the finance sector. 

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