Why Santander Consumer USA Holdings Inc. Stock Is Surging Today

By Markets Fool.com

Image source: Santander Consumer USA Holdings.

Continue Reading Below

What happened

Shares of Santander Consumer USA Holdings Inc. (NYSE: SC) are on the move, up about 10% as of 1 p.m. EDT on Friday, after the company announced it would restate financial reports for the last three years.

So what

The subprime auto lender has had its fair share of accounting issues. The company disclosed earlier this year that it had weaknesses in internal controls surrounding the way it accretes earnings for dealer discounts, the methods it applied to estimate allowances for loan losses, and the discount rates it used for determining impairments to loans that were accounted for as troubled-debt restructurings.

The jump in the share price today likely reflects the market's surprise that, upon restating its financial results, the company's earnings and shareholder's equity will increase. Santander Consumer USA noted that equity should rise by approximately 1%, while the restatement will result in an increase of $9 million to its first-quarter net income, or approximately $0.02 per share.

Continue Reading Below

Now what

The company hasn't exactly put all of its issues behind it. In the statement, it noted that it expects to "report the existence of additional, previously unreported material weaknesses in internal control over financial reporting."

It plans to file its quarterly report for the second quarter "as soon as possible," but noted that it will complete its amended filings before the deadline for third-quarter filings. At least for today, Wall Street seems quite pleased that earnings and equity will be restated upward, rather than downward.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Jordan Wathen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.