What's in the Cards for Raymond James (RJF) in Q1 Earnings?
Raymond James RJF is scheduled to announce first-quarter fiscal 2024 (ended Dec 31) results on Jan 24, after market close. While quarterly earnings are expected to have declined, revenues might have witnessed a rise on a year-over-year basis.
In the last reported quarter, RJF’s earnings lagged the Zacks Consensus Estimate. Results were adversely impacted by a rise in expenses, disappointing investment banking (IB) performance and higher bank loss provision for credit losses. Yet, higher net interest income, a decent loan demand and past acquisitions acted as tailwinds.
Raymond James doesn’t have a decent earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in only one of the trailing four quarters.
Raymond James Financial, Inc. Price and EPS Surprise
Raymond James Financial, Inc. price-eps-surprise | Raymond James Financial, Inc. Quote
The Zacks Consensus Estimate for the company’s fiscal first-quarter earnings is pegged at $2.25, which has moved almost 1% lower over the past seven days. The figure indicates a fall of 1.8% from the year-ago quarter. Our estimate for adjusted earnings is pegged at $2.19, implying a 4.3% decline.
The consensus estimate for sales of $2.98 billion suggests 7% year-over-year growth. We expect net revenues to be $2.97 billion.
Factors at Play
IB Fees: While green shoots were visible in the IB space, overall M&A activities remained subdued on a year-over-year basis. Headwinds like lingering geopolitical tensions, inflation concerns, higher interest rates and China’s economic slowdown weighed on deal-making. Thus, the deal volume and total value numbers were weak in the quarter, which might have hurt Raymond James’ advisory fees.
Because of the above-mentioned macro concerns, the IPO markets did not witness much activity in the quarter. While follow-up equity issuances were decent on the back of robust equity market performance toward the end of the year, bond issuance volumes were decent. So, RJF’s underwriting fees are expected to have been positively impacted in the quarter.
The consensus estimate for IB fees is pegged at $166.2 million, suggesting a 17.9% rise on a year-over-year basis. We anticipate IB fees of $126 million.
Trading Revenues: Unlike the past few quarters, when huge market volatility and client activity drove trading revenues, capital markets were subdued in the to-be-reported quarter. While the risk of a near-term recession has faded, concerns like the economic slowdown, persistent inflation and other geopolitical issues led to ambiguity among investors in the quarter. These factors resulted in lower volatility in equity markets and other asset classes, including commodities, bonds and foreign exchange. So, Raymond James’ trading revenues are likely to have been subdued.
Net Interest Income: Lending activities remained weak in the to-be-reported quarter. Continuing with its efforts to curb inflation, the Federal Reserve kept the interest rates unchanged at a 22-year high of 5.25-5.5%. While this is likely to have had a favorable impact on RJF’s net interest income (NII), the inversion of the yield curve in the December-ended quarter and higher deposit costs are expected to have weighed on it to some extent.
The Zacks Consensus Estimate for interest income stands at $1.02 billion, indicating a jump of 23.5%. Our estimate for the metric is the same as the consensus number.
Expenses: Raymond James consistently hires advisors and invests in franchises. Thus, overall expenses are expected to have risen in the quarter. Also, due to a highly competitive environment, costs might have been elevated.
We project total non-interest expenses to be $2.38 billion, implying an 11.4% year-over-year increase.
Management’s Q1 Expectations
The company expects combined NII and RJBDP fees from third-party banks to decline 5% sequentially.
The Private Client Group segment results are expected to be favorably impacted by the 2% sequential increase of assets in fee-based accounts.
What the Zacks Model Reveals
According to our proven model, the chances of Raymond James beating the Zacks Consensus Estimate this time are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher.
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 Raymond James is +0.55%.
Zacks Rank: The company currently carries a Zacks Rank #2 (Buy).
Other Finance Stocks Worth a Look
Here are a couple of other finance stocks that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this time:
The Earnings ESP for Invesco IVZ is +0.63% and it carries a Zacks Rank #3 at present. The company is slated to report fourth-quarter and full-year 2023 results on Jan 23.
Over the past seven days, the Zacks Consensus Estimate for IVZ’s quarterly earnings has moved 2.7% north to 38 cents per share.
SEI Investments SEIC is expected to release quarterly numbers on Jan 24. The company, which carries a Zacks Rank #2 at present, has an Earnings ESP of +2.40%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SEIC’s quarterly earnings estimates have remained unchanged at 90 cents over the past week.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Invesco Ltd. (IVZ) : Free Stock Analysis Report
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SEI Investments Company (SEIC) : Free Stock Analysis Report
