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Investment Banking to Aid Cowen Group (COWN) Q1 Earnings

·4 min read

Cowen Group, Inc. COWN is slated to announce first-quarter 2021 results on Apr 29, before the opening bell. Its earnings and revenues are expected to have improved year over year.

Revenue growth on higher fees from capital markets issuance, advisory and M&As supported the company’s fourth-quarter 2020 earnings, which surpassed the Zacks Consensus Estimate. This was partly offset by higher expenses.

It has an impressive earnings surprise history. The company’s earnings surpassed the consensus estimate in three of the trailing four quarters, with the beat being 14.91%, on average.

Cowen Group, Inc. Price and EPS Surprise

Cowen Group, Inc. Price and EPS Surprise
Cowen Group, Inc. Price and EPS Surprise

Cowen Group, Inc. price-eps-surprise | Cowen Group, Inc. Quote

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings of $4.33 has moved 39.7% upward over the past 30 days. Earnings estimates suggest substantial growth from the year-ago reported figure. Also, the consensus estimate for sales of $506.7 million indicates considerable increase.

Factors at Play

Higher Underwriting Fees: Given the low rates and the Federal Reserve’s bond purchase program, bond issuance volumes were solid in the quarter. Also, IPO activities were stellar, and as companies continued to build liquidity amid solid equity market performance, there was a rise in follow-up equity issuances. These are likely to have aided Cowen Group’s underwriting revenues in the to-be-reported quarter.

Strong Advisory Fees: After an impressive second-half 2020 performance, the momentum in deal making activities continued in the quarter under review as well on the back of extensive vaccination drives, a brighter macroeconomic outlook and lower interest rates. During the first quarter, the number of announced M&As jumped. Though the deal volume didn’t show much improvement, the total value of pending/completed transactions increased drastically.

Also, in light of the pandemic, many companies began business restructuring process with an aim to maintain profitability. This is likely to have boosted Cowen Group’s advisory fees.

The Zacks Consensus Estimate for investment banking revenues (economic) for the to-be-reported quarter is pegged at $186 million, which indicates substantial growth from the prior-year quarter’s reported number.

Asset Growth: Similar to 2020, the first quarter of 2021 recorded a rise in market volatility and higher client activity. Moreover, the quarter witnessed decent asset inflows, which are expected to have aided AUM balance.

Notably, the consensus estimate for management fees (economic) of $17.04 million suggests a jump of 14.4% year over year.

Controlled Expenses: Higher investment banking and brokerage activities during the to-be-reported quarter might have been offset by lower marketing-related costs.

Here is what our quantitative model predicts:

Cowen Group does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Cowen Group is 0.00%.

Zacks Rank: The company currently has a Zacks Rank #3.

Stocks Worth a Look

Here are a few finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:

T. Rowe Price Group TROW is scheduled to release earnings on Apr 29. The company, which carries a Zacks Rank #2 (Buy) at present, has an Earnings ESP of +0.57%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Prosperity Bancshares, Inc. PB is +2.56% and it carries a Zacks Rank #3, currently. The company is scheduled to report quarterly numbers on Apr 28.

Carlyle Group CG is slated to report quarterly results on Apr 29. The company currently has an Earnings ESP of +1.46% and a Zacks Rank of 3.

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T. Rowe Price Group, Inc. (TROW) : Free Stock Analysis Report

Cowen Group, Inc. (COWN) : Free Stock Analysis Report

Carlyle Group Inc. (CG) : Free Stock Analysis Report

Prosperity Bancshares, Inc. (PB) : Free Stock Analysis Report

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