Barclays Sees Better-Than-Expected Q2 EPS From OneMain Holdings

Barclays expects OneMain Holdings Inc (NYSE: OMF) to report better-than-expected earnings for the second quarter on strong core trends.

Analyst Mark DeVries expects second quarter core earnings of $1.01 a share relative to consensus of $1.00 a share. The analyst estimates net-charge-offs of 7.3 percent for consumer loans, down 20bps quarter-over-quarter but up about 40bps year-over-year.

"We expect the mix shift to lower loss auto and hard secured loans should improve credit performance going forward and OMF should be within the target range of 6.8%-7.3% for the year," DeVries wrote in a note.

Further, the analyst sees total core provisions of $272 million and consumer loan growth of roughly 7 percent quarter-over-quarter to about $13 billion.

"But with the stock trading below 5x consensus 2017 earnings estimates, the market has clearly not ascribed any sort of growth multiple to the stock, likely due to continued concerns over leverage and how credit could act in a recession," DeVries highlighted.

The analyst noted the recent presentation from OMF showing cumulative losses of about 1.2 percent on loans with about 1.5 years of seasoning, which is better than legacy LEAF's hard secured loans and comparable indirect auto loans.

DeVries has an Overweight rating and $36 price target on the stock. At time of writing, shares of OneMain Holdings rose 4.96 percent to $26.14.