Why OneMain Holdings May Benefit Disproportionately From A Trump Administration

Since the 40-percent share price dive following disappointing Q3 earnings and cut guidance reported last month, OneMain Holdings Inc OMF has recovered slightly, still trading at a 20-percent premium compared with their pre-earnings share price. According to Deutsche Bank Capital Markets analyst David Ho, “Expectations have been reset low” following the earnings.

The analyst initiated coverage on the stock with a Buy rating and a price target of $29. With the newly reset expectations, only 30 percent of analysts have the stock rated at a Buy, and the consensus EPS estimate has been adjusted for integration, “but not for President-elect Trump.”

“We conducted numerous branch checks to confirm our view that investors are underestimating the potential upside from reducing future integration disruptions,” said Ho.

Overall, the analyst cited five key factors to support his bullish thesis:

1. Reset Street expectations.
2. Channel checks showing "meaningful improvement to credit/growth trends."
3. Higher earnings power.
4. Multiple paths to improving credit trends: low unemployment, more secured lending, auto lending less dependent on used car prices.
5. “A large and growing market.”

OneMain is expected to report Q4 earnings on February 23 before the market open. At last check, shares were trading 3 percent up at $22.20.