What's in Store for Raymond James (RJF) in Q4 Earnings?
Raymond James RJF is scheduled to announce fourth-quarter and full-year fiscal 2023 (ended Sep 30) results on Oct 25, after market close. Quarterly earnings and revenues are expected to have witnessed a rise on a year-over-year basis.
In the last reported quarter, the company’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 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 two 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 fourth-quarter earnings is pegged at $2.28, which has moved marginally lower over the past seven days. The figure indicates growth of 9.6% from the year-ago quarter. Our estimate for adjusted earnings is pegged at $2.27, implying a 9.1% improvement.
The consensus estimate for sales of $2.99 billion suggests 5.8% year-over-year growth. We expect net revenues to be the same as the consensus number.
Factors to Note for Q4
Investment Banking Fees: Global deal-making witnessed a slight rebound in the fiscal fourth quarter, but M&A activities remained subdued on a year-over-year basis. Headwinds like geopolitical tensions, government shutdown, inflation, rising interest rates and fears of a global economic slowdown continued to weigh on deal-making. Thus, the deal volume and total value numbers were weak in the quarter, which might have hurt Raymond James’ advisory fees.
The IPO market witnessed considerable activity in the to-be-reported quarter, with 26 IPOs jointly raising $7.7 billion. The amount is almost equal to the total proceeds raised in 2022. Yet, the overall performance was still subdued and nowhere near normal. However, while follow-up equity issuances were muted in the to-be-reported quarter, bond issuance volumes improved from the prior-year quarter. So, RJF’s underwriting fees are expected to have been positively impacted in the quarter.
The consensus estimate for IB fees is pegged at $152.4 million, suggesting a 29.8% plunge on a year-over-year basis. We anticipate IB fees of $161.1 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, the central bank’s hawkish monetary policy and other geopolitical issues remain led to ambiguity among investors in the quarter. Moreover, the quarter is a seasonally weak one for capital markets.
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 continued to slow down in the to-be-reported quarter. Continuing with its efforts to curb inflation, the Fed raised the interest rates by another 25 basis points in July before pausing the hike in the September FOMC meeting. The policy rate is now 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 September-ended quarter and higher deposit costs are expected to have weighed on it to some extent.
The Zacks Consensus Estimate for NII stands at $454.3 million, indicating a rise of 8.9%. Our estimate for the metric stands at $590 million.
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 $2.4 billion, implying an 8.3% year-over-year increase.
Management’s Q4 Expectations
The company expects combined NII and RJBDP fees from third-party banks to decline 5% sequentially as a further contraction in Bank segment NII will be partially offset by an increase in third-party RJBDP fees.
The Private Client Group segment results are expected to be favorably impacted by the 5% 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 low. This is because it doesn’t have 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 -0.22%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Finance Stocks That Warrant a Look
Here are a couple of 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:
The Earnings ESP for Trustmark Corporation TRMK is +14.08% and it carries a Zacks Rank #3 at present. The company is slated to report third-quarter 2023 results on Oct 24.
Over the past 30 days, the Zacks Consensus Estimate for TRMK’s quarterly earnings has moved 1.5% north to 69 cents per share.
Pacific Premier Bancorp, Inc. PPBI is also scheduled to release quarterly numbers on Oct 24. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +4.98%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PPBI’s quarterly earnings estimates have remained unchanged over the past month.
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Raymond James Financial, Inc. (RJF) : Free Stock Analysis Report
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