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BGC Partners Lowers Revenue Guidance for Q2 Amid Concerns

Zacks Equity Research

Owing to a tough operating backdrop, BGC Partners, Inc. BGCP lowered its revenue guidance for second-quarter 2020. The company has also updated its outlook for pre-tax adjusted earnings.

On May 7, 2020, BGC Partners provided second-quarter outlook. Revenues were expected to be $525-$575 million, while pre-tax adjusted earnings were anticipated to be $89-$109 million.

However, due to weaker industry volumes, the company now expects revenues for the to-be-reported quarter to be slightly below the low-end of the guidance range. Pre-tax adjusted earnings are projected to be slightly above the low-end of the previously mentioned range.

Notably, in the first quarter, the company recorded revenues of $603.17 million, which represented growth of 10.7% year over year. The rise was mainly driven by an increase in brokerage revenues.

Recently, at the 2020 Morgan Stanley U.S. Financials Virtual Conference, top executives from some of the major banks issued mixed guidance for the June-end quarter as well as the second half of the year.

John Shrewsberry — chief financial officer (“CFO”) at Wells Fargo WFC — stated that interest income for this year will likely decline more than 11% year over year. Moreover, loan loss reserve in the current quarter is expected to exceed the first quarter, in which results were marred by the coronavirus mayhem.

JPMorgan’s JPM chief operating officer — Gordon Smith — noted that retail banking might be challenging due to interest rates in the second quarter though growing deposits will likely be a savior.

Meanwhile, commenting on the outlook, Citigroup C CFO Mark Mason said that loan balances and net interest revenues are expected to fall in the June-end quarter, while credit card spending has also gone down in May. Overall, revenues are likely to be slightly down in the current quarter. Expenses might fall slightly during the period.

Amid the global market turmoil due to the coronavirus crisis, finance companies, particularly banks, are very skeptical about second-quarter performance. However, as the Fed is supporting the economy with all its might and banks have ample liquidity, the U.S. economy is likely to come out of the woods as early as the second half of the year.

Over the past six months, shares of BGC Partners have lost 53.6% compared with a decline of 17.8% recorded by the industry.

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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