Trading Rebound To Support Raymond James' (RJF) Q2 Earnings

Raymond James Financial, Inc. (NYSE:RJF) is scheduled to announce second-quarter fiscal 2018 (ended Mar 31) results on Apr 25, after the market closes. Its revenues and earnings are expected to grow year over year.

Improved investment banking drove the company’s fiscal first-quarter 2018 earnings, which beat the Zacks Consensus Estimate. This was partially offset by elevated expenses.

Also, the stock has an impressive earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 9.8%.

Notably, the Zacks Consensus Estimate for the to-be reported quarter earnings of $1.63 has been revised 4.1% downward over the last 30 days. Nonetheless, the earnings estimates reflect a year-over-year jump of 27.3%. Also, the Zacks Consensus Estimate for sales of $1.81 billion indicates 15.6% growth from the prior-year quarter.

Raymond James Financial, Inc. Price and EPS Surprise

Raymond James Financial, Inc. Price and EPS Surprise | Raymond James Financial, Inc. Quote

Factors to Influence Q2 Results

Trading rebound to lend support: After three consecutive quarters of muted activities, the markets witnessed significant volatility and revival of client activities in the last two months of the quarter. Concerns over trade war between the United States and China, higher inflation expectation in the United States, further tightening of the monetary policy by the Fed and sell-off in the tech sector incited significant volatility. Therefore, Raymond James will likely witness an improvement in trading revenues in the to-be-reported quarter.

Stable underwriting fees: Unlike prior quarters, growth in underwriting fees, consisting of debt and equity underwriting, is expected to be muted. Rising interest rates are likely to have slowed down corporates’ involvement in debt issuances.

Further, high volatility in the equity markets across the globe is expected to have somewhat slowed down equity issuances. While the prior quarter was an exception, IPOs and follow-on offerings in the to-be-reported quarter are likely to be modest. Thus, growth in both debt and equity underwriting fees for Raymond James is likely to be muted in the to-be-reported quarter.

Muted advisory fee growth: M&A activity in terms of deals closed globally witnessed a fall in the quarter, though the overall deal value recorded a significant rise. Thus, as number of deals declined, advisory fees are expected to be adversely impacted to some extent. So, Raymond James is not likely to remain untouched.

Loan growth in RJ Bank to support interest income: With economic stabilization and a rise in demand for loans and higher rates, RJ Bank segment is expected to record a jump in interest income.

Expenses to rise: Raymond James consistently hires advisors and invests in franchises and thus, overall expenses are expected to increase. Further, regulatory changes and a highly competitive environment will likely lead to a further rise in expenses.

Earnings Whispers

Our quantitative model shows that chances of Raymond James beating the earnings estimates this time are low. That’s because it does not have the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The Earnings ESP for Raymond James is 0.00%.

Zacks Rank: Raymond James has a Zacks Rank #4 (Sell), which further decreases the predictive power of ESP.

Stocks to Consider

Here are a few 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 in their upcoming releases:

Capital One Financial Corporation (NYSE:COF) has an Earnings ESP of +0.79% and carries a Zacks Rank of 3. The company is slated to release results on Apr 24.

BOK Financial Corporation (NASDAQ:BOKF) is slated to report first-quarter 2018 results on Apr 25. It has an Earnings ESP of +0.24% and a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

New York Community Bancorp (NYSE:NYCB) is slated to release results on Apr 25. It has an Earnings ESP of +0.14% and carries a Zacks Rank #3.

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