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What's in Store for Raymond James (RJF) in Q4 Earnings?

Zacks Equity Research

Raymond James RJF is schedule to announce fourth-quarter fiscal 2019 (ended Sep 30) results on Oct 23, after market close. Its earnings and revenues are expected to have increased year over year.

Weak investment banking performance and higher expenses hurt the company’s third-quarter fiscal 2019 results, partly offset by increase in revenues.

It has a decent earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters.

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings of $1.99 has remained unchanged over the past 30 days, suggesting a rise of 18.5% from the year-ago reported figure. Also, the consensus estimate for sales of $1.99 billion reflects 4.9% increase.

Factors at Play

Fall in trading revenues: Client activity slowed down in the to-be-reported quarter, given several concerns like uncertainty related to the U.S.-China trade war and Brexit, and fears of global economic slowdown. The Fed’s accommodative policy stance and other geopolitical matters persisted as well. These factors kept clients on the sidelines. Thus, Raymond James’ trading revenues are likely to have witnessed a downturn.

Modest rise in advisory fees: While dealmakers across the globe were active during the quarter, global deal value and volume witnessed a fall due to several geopolitical concerns, which led the companies to become more risk-averse. These likely had an adverse impact on Raymond James’ advisory fees. Nonetheless, the strong M&A deal pipeline from the previous quarters might have offered some support.

Marginal increase in underwriting fees: Fears of economic slowdown and uncertainty over the Federal Reserve’s monetary policy weighed on companies’ plans to raise capital by issuing shares. Thus, Raymond James’ equity underwriting fees are expected to have been soft despite decent stock market performance.

Nonetheless, lower interest rates might have had a favorable impact on debt issuances during the quarter. Thus, debt underwriting fees are expected to have improved marginally.

Interest income not of much support: With economic stabilization, demand for loans increased. However, during the to-be-reported quarter, overall lending scenario remained muted. This, along with the two interest rate cuts (in July and September), flattening/inversion of the yield curve and steadily rising deposit betas might have hampered RJ Bank’s interest income growth.

Higher expenses: Raymond James consistently hires advisors and invests in franchises and thus, overall expenses might have risen. Further, regulatory changes and a highly competitive environment are expected to have led to increase in costs.

Management expects communication and information processing costs to be in low to mid-90s range for the fiscal fourth quarter. Business development expenses and other costs are expected to be at the higher end of the $45-$55 million and $70-$80 million range, respectively.

Here is what our quantitative model predicts:

Our proven model doesn’t conclusively predict an earnings beat for Raymond James this time around. The combination of a positive Earnings ESP and Zacks Rank #3 (Hold) or better increases the odds of an earnings beat. But that’s not the case here.

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 0.00%.

Zacks Rank: Raymond James currently carries a Zacks Rank #4 (Sell).

Raymond James Financial, Inc. Price and EPS Surprise

 

Raymond James Financial, Inc. Price and EPS Surprise

 

Raymond James Financial, Inc. price-eps-surprise | Raymond James Financial, Inc. Quote

Stocks to Consider

Here are some finance stocks that you may want to consider as these have the right combination of elements to post an earnings beat this quarter.

Blackstone BX is slated to release results on Oct 23. It has an Earnings ESP of +3.70% and currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Huntington Bancshares Incorporated HBAN is slated to release results on Oct 24. It presently has an Earnings ESP of +0.60% and a Zacks Rank #3.

Cullen/Frost Bankers, Inc. CFR has an Earnings ESP of +0.07% and carries a Zacks Rank #3 at present. The company is scheduled to release results on Oct 24.

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