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Will Trading Revenues Support E*TRADE's (ETFC) Q2 Earnings?
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E*TRADE Financial is scheduled to report second-quarter 2020 results on Jul 23. The company’s performance will likely reflect year-over-year declines in revenues and earnings.
In the last reported quarter, E*TRADE posted a negative earnings surprise of 10.9%, reflecting a decline in revenues on lower net interest income. Further, escalating expenses and provisions were major drags. However, improved daily average revenue trades (DARTs) owing to an upsurge in volatility on the coronavirus concerns were a positive. In addition, rise in non-interest income and customer accounts during the period acted as tailwinds.
E*TRADE has an impressive earnings surprise history. It beat estimates in three of the trailing four quarters, and missed in one, the average beat being 0.04%.
Estimates for the to-be-reported quarter have remained unrevised, over the last seven days. Notably, the Zacks Consensus Estimate suggests a 33% decline for earnings and a 1.02% fall for sales, year over year, respectively.
ETRADE Financial Corporation Price and EPS Surprise
Rise in Trading Revenues: Increase in client activities and an unexpected rise in market volatility on the coronavirus scare are likely to have aided trading revenues (both equity and fixed-income). Continued global economic slowdown, the Fed’s accommodative stance and a number of activities in the quarter, consistently impacting the economy, kept tickling trading counters which resulted in volatile market performance. Therefore, a projected rise in DARTs in the quarter is likely to have supported commission revenues as well. The consensus estimate for DARTs is 906,972, up 39.1% on a sequential basis.
Net new accounts of 138,409 and 116,447 in April and May, respectively, suggest investors’ interest in entering the market. Therefore, growth in accounts might have driven trading revenues.
Overall, the Zacks Consensus Estimate for non-interest income of $299 billion for the second quarter indicates a 53.3% year-over-year rise.
Weak Interest Income: As net interest income (NII) constitutes a significant part of E*TRADE’s revenues, a soft lending scenario during the quarter is predicted to have marred NII growth to some extent. Further, the central bank’s accommodative monetary-policy stance, with a decline in interest rates and its impact on the yield curve, might have clipped the net interest margin in the quarter to be reported. However, a rise in average interest earning assets is anticipated to have provided support to its interest income.
Notably, the Zacks Consensus Estimate for average interest earning assets of $60.4 billion for the June-end quarter calls for a marginal year-over-year increase.
Elevated Expenses: The company plans to make several investments, along with spending money, in marketing. This might have escalated expenses during the quarter to be reported.
Here is what our quantitative model predicts:
E*TRADE does not have the right combination of the 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.
Earnings ESP: The Earnings ESP for E*TRADE is 0.00%.
Zacks Rank: E*TRADE currently carries a Zacks Rank of 3, which increases the predictive power of ESP. But we also need to have a positive ESP to be confident of a positive earnings surprise.
Banks Worth a Look
Here are a few bank 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 around:
Huntington Bancshares Incorporated (HBAN - Free Report) is set to release earnings figures on Jul 23. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +11.6%.
T. Rowe Price Group, Inc. (TROW - Free Report) is scheduled to release quarterly results on Jul 29. The company has an Earnings ESP of +3.91% and currently sports a Zacks Rank of 1.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Image: Bigstock
Will Trading Revenues Support E*TRADE's (ETFC) Q2 Earnings?
E*TRADE Financial is scheduled to report second-quarter 2020 results on Jul 23. The company’s performance will likely reflect year-over-year declines in revenues and earnings.
In the last reported quarter, E*TRADE posted a negative earnings surprise of 10.9%, reflecting a decline in revenues on lower net interest income. Further, escalating expenses and provisions were major drags. However, improved daily average revenue trades (DARTs) owing to an upsurge in volatility on the coronavirus concerns were a positive. In addition, rise in non-interest income and customer accounts during the period acted as tailwinds.
E*TRADE has an impressive earnings surprise history. It beat estimates in three of the trailing four quarters, and missed in one, the average beat being 0.04%.
Estimates for the to-be-reported quarter have remained unrevised, over the last seven days. Notably, the Zacks Consensus Estimate suggests a 33% decline for earnings and a 1.02% fall for sales, year over year, respectively.
ETRADE Financial Corporation Price and EPS Surprise
ETRADE Financial Corporation price-eps-surprise | ETRADE Financial Corporation Quote
Key Factors
Rise in Trading Revenues: Increase in client activities and an unexpected rise in market volatility on the coronavirus scare are likely to have aided trading revenues (both equity and fixed-income). Continued global economic slowdown, the Fed’s accommodative stance and a number of activities in the quarter, consistently impacting the economy, kept tickling trading counters which resulted in volatile market performance. Therefore, a projected rise in DARTs in the quarter is likely to have supported commission revenues as well. The consensus estimate for DARTs is 906,972, up 39.1% on a sequential basis.
Net new accounts of 138,409 and 116,447 in April and May, respectively, suggest investors’ interest in entering the market. Therefore, growth in accounts might have driven trading revenues.
Overall, the Zacks Consensus Estimate for non-interest income of $299 billion for the second quarter indicates a 53.3% year-over-year rise.
Weak Interest Income: As net interest income (NII) constitutes a significant part of E*TRADE’s revenues, a soft lending scenario during the quarter is predicted to have marred NII growth to some extent. Further, the central bank’s accommodative monetary-policy stance, with a decline in interest rates and its impact on the yield curve, might have clipped the net interest margin in the quarter to be reported. However, a rise in average interest earning assets is anticipated to have provided support to its interest income.
Notably, the Zacks Consensus Estimate for average interest earning assets of $60.4 billion for the June-end quarter calls for a marginal year-over-year increase.
Elevated Expenses: The company plans to make several investments, along with spending money, in marketing. This might have escalated expenses during the quarter to be reported.
Here is what our quantitative model predicts:
E*TRADE does not have the right combination of the 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.
Earnings ESP: The Earnings ESP for E*TRADE is 0.00%.
Zacks Rank: E*TRADE currently carries a Zacks Rank of 3, which increases the predictive power of ESP. But we also need to have a positive ESP to be confident of a positive earnings surprise.
Banks Worth a Look
Here are a few bank 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 around:
The Earnings ESP for CullenFrost Bankers, Inc. (CFR - Free Report) is +6.27% and the stock carries a Zacks Rank of 3, at present. The company is slated to report second-quarter numbers on Jul 30. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Huntington Bancshares Incorporated (HBAN - Free Report) is set to release earnings figures on Jul 23. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +11.6%.
T. Rowe Price Group, Inc. (TROW - Free Report) is scheduled to release quarterly results on Jul 29. The company has an Earnings ESP of +3.91% and currently sports a Zacks Rank of 1.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>