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What's in Store for Raymond James (RJF) in Q1 Earnings?

Zacks Equity Research

Raymond James RJF is scheduled to announce first-quarter fiscal 2020 (ended Dec 31) results on Jan 22, after market close. Its earnings and revenues are expected to have increased 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. However, higher operating expenses acted as an undermining factor.

Notably, Raymond James has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three 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-eps-surprise | Raymond James Financial, Inc. Quote

However, its activities and business prospects in the to-be-reported quarter failed to encourage analysts to revise estimates upward. Thus, the Zacks Consensus Estimate for its earnings for the October-December quarter of $1.90 has been unchanged over the past seven days. The figure suggests rise of 6.2% from the year-ago quarter’s reported number.

Also, the consensus estimate for sales is pegged at $2 billion, which indicates a 3.6% year-over-year increase.

Key Factors to Note

Trading revenues likely to provide support: Though several lingering matters like uncertainty related to the U.S.-China trade conflict and Brexit might have impacted trading activities in the quarter, positive developments in the same toward the end of the quarter and improving domestic economy are likely to have provided respite, resulting in an upswing in client activities.

Thus, driven by rise in client activity, Raymond James’ trading revenues are likely to have been positively impacted.

Advisory fees not of much help: In the October-December quarter, the number of announced M&As increased, which indicates a strong pipeline. However, the number of closed deals declined during the quarter. Also, global deal value declined. Thus, Raymond James’ advisory fees are likely to have been negatively impacted.

Underwriting fees may improve marginally: Solid equity market performance and the central banks’ accommodative policy stance drove corporates to issue equities across the globe during the quarter. Thus, Raymond James’ equity underwriting fees are likely to have improved to some extent.

However, while bond issuance volumes were solid, debt issuances were muted as corporate loan demand was weak. Hence, the company’s debt underwriting fees are likely to have been hurt in the quarter.

Interest income likely to decline modestly: During the to-be-reported quarter, the overall lending scenario was not great. Thus, soft loan growth along with the decline in interest rates is likely to have negatively impacted RJ Bank’s interest income growth.

Expenses likely to rise: Raymond James consistently hires advisors and invests in franchises and thus, overall expenses might have risen in the quarter. Further, regulatory changes and a highly competitive environment are likely to have led to an increase in costs.

Here is what our quantitative model predicts:

According to our quantitative model, it cannot be conclusively predicted whether Raymond James will be able to beat the Zacks Consensus Estimate this time. 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 #2 (Buy). While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings beat.

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 in their upcoming releases, per our model.

Commerce Bancshares, Inc. CBSH is slated to release results on Jan 22. It currently has an Earnings ESP of +0.12% and a Zacks Rank #3.

Associated Banc-Corp ASB is slated to release results on Jan 23. It presently has an Earnings ESP of +0.49% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

SVB Financial Group SIVB has an Earnings ESP of +0.65% and a Zacks Rank #3 at present. The company is slated to release results on Jan 23.

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