NEW YORK (TheStreet) -- Shares of CIT Group Inc. (CIT) are up 8.08% to $47.50 in pre-market trade as the business lender said today that it reached a deal to buy the parent company of OneWest Bank NA for $3.4 billion, according to the Wall Street Journal.
CIT CEO John called the deal "transformational."
Also, CIT reported a 34% increase in second quarter profit, beating analysts' expectations, and announced a new $500 million stock buyback program.
TheStreet Ratings team rates CIT GROUP INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate CIT GROUP INC (CIT) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Commercial Banks industry. The net income has significantly decreased by 32.9% when compared to the same quarter one year ago, falling from $162.60 million to $109.10 million.
- The share price of CIT GROUP INC has not done very well: it is down 9.94% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- CIT GROUP INC's earnings per share declined by 32.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CIT GROUP INC turned its bottom line around by earning $3.36 versus -$2.96 in the prior year. For the next year, the market is expecting a contraction of 5.1% in earnings ($3.19 versus $3.36).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Commercial Banks industry and the overall market, CIT GROUP INC's return on equity is below that of both the industry average and the S&P 500.
- The gross profit margin for CIT GROUP INC is rather high; currently it is at 65.01%. Regardless of CIT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CIT's net profit margin of 12.15% is significantly lower than the industry average.
- You can view the full analysis from the report here: CIT Ratings Report