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What's in Store for Raymond James (RJF) in Q2 Earnings?

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Zacks Equity Research
·4 min read
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Raymond James RJF is scheduled to announce second-quarter fiscal 2020 (ended Mar 31) results on Apr 29, after market close. Its earnings are expected to have declined in the quarter on a year-over-year basis.

In the last reported quarter, the company’s results benefited from an increase in revenues and decent asset growth, offset by higher expenses.

Raymond James has a decent earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in two and met in one of the trailing four quarters.

Raymond James Financial, Inc. Price and EPS Surprise

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

The Zacks Consensus Estimate for earnings of 89 cents for the quarter has been unchanged over the past seven days. The figure indicates a decline of 50.8% from the year-ago quarter’s reported number.

Before we take a look at what our quantitative model predicts, let’s check the factors that are expected to have influenced Raymond James’ fiscal second-quarter performance.

Key Factors to Note

Trading revenues: The coronavirus outbreak resulted in an unexpected rise in market volatility along with higher client activities during the quarter. The to-be-reported quarter began on a positive note but concerns surrounding the impact of the virus outbreak on the economy resulted in a roller coaster ride, with all the major indexes — the S&P 500, Dow Jones and Nasdaq — swinging from new highs to record lows.

Owing to the significant volatility, Raymond James’ trading revenues are expected to have improved to an extent.

Advisory fees: Due to the virus-induced economic slowdown, overall business activities got hampered in the quarter. Hence, the number of announced M&As declined. Thus, as global M&A activity remained weak, Raymond James’ advisory fees are likely to have been adversely impacted.

Underwriting fees: Decent equity market performance in January and February along with the central banks’ accommodative stance are likely to have driven corporates to issue equities globally. However, following the virus outbreak, significant volatility in the equity markets dried up issuances. IPO activities also followed a similar trend. Thus, Raymond James’ equity underwriting fees are expected to have been negatively impacted in the quarter.

Also, bond issuance volumes were solid during the quarter, while debt issuances were muted, owing to soft loan demand. Hence, growth in the company’s debt underwriting fees is expected to have been muted.

Interest income: The lending backdrop was strong in January and February. But the virus outbreak in March resulted in a drop in loan demand, as business and consumer activities came to a halt. Thus, due to soft loan growth along with the decline in interest rates, Raymond James’ interest income growth is expected to have been muted.

Notably, management expects net interest margin in second-quarter fiscal 2020 to remain flat sequentially.

Expenses: Raymond James consistently hires advisors and invests in franchises and thus, overall expenses might have risen in the quarter. Further, due to a highly competitive environment, costs are expected to have remained elevated.

Here is what our quantitative model predicts:

Chances of Raymond James beating the Zacks Consensus Estimate this time are low. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better, which is required to be confident of an earnings surprise call.

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: The company currently carries a Zacks Rank #4 (Sell).

Stocks to Consider

The Earnings ESP for Boston Private Financial Holdings, Inc. BPFH is +1.54% and it carries a Zacks Rank of 3 currently. The company is set to announce quarterly numbers on Apr 29.

First BanCorp. FBP is slated to report quarterly earnings on Apr 30. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +8.51%.

Moody's Corporation MCO is set to announce results on Apr 30. It carries a Zacks Rank of 3 at present and has an Earnings ESP of +0.18%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Moody's Corporation (MCO) : Free Stock Analysis Report
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