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Factors Shaping Raymond James (RJF) Fate Ahead of Q4 Earnings

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Raymond James (RJF - Free Report) is slated to announce fourth quarter and fiscal 2020 (ended Sep 30) results on Oct 28, after market close. Its quarterly earnings and revenues are expected to have declined.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate. The results benefited from robust Capital Markets segment performance and a rise in assets balance, partly offset by higher expenses and decline in revenues.

Raymond James has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters, the positive surprise being 17.13%, on average.

The Zacks Consensus Estimate for earnings of $1.36 per share for the quarter has moved 18.3% north over the past 30 days. Nevertheless, the figure indicates a decline of 32% from the year-ago number. Also, the consensus estimate for sales of $1.95 billion suggests 3.4% fall.

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

Key Factors at Play

Trading Revenues: A persistent rise in market volatility on account of the coronavirus outbreak was seen during the quarter. The pandemic and concerns surrounding its impact on the economy weighed on investor sentiments. With a spike in volatility and higher client activities, Raymond James’ trading revenues are likely to have witnessed a significant boost in the to-be-reported quarter.

Underwriting Fees: Amid near-zero interest rates and the Federal Reserve’s bond purchase program, which commenced on Mar 23, bond issuance volumes were solid in the quarter as companies took this as an opportunity to bolster their balance sheets. Further, IPO activities bounced back, with the quarter being one of the busiest since 2000. Also, as companies continued to build liquidity to tide over the pandemic-induced crisis, there was a rise in follow-up equity issuances.

Thus, growth in Raymond James’ equity underwriting and debt origination fees is expected to have been solid in the to-be-reported quarter.

Advisory Fees: Deal making rebounded in the July-September quarter as economic and business activities gradually resumed. During the quarter, dealmakers revisited transactions that were on hold as coronavirus wreaked havoc across the world. Thus, as global M&A activity resumed full-fledged, Raymond James’ advisory fees are likely to have been positively impacted.

Interest Income: Lending was subdued during the quarter as the virus outbreak resulted in a decline in loan demand amid economic slowdown. Thus, this along with low interest rates, Raymond James’ interest income growth is expected to have been weak.

Notably, management expects net interest margin for fourth-quarter fiscal 2020 to be 2.1-2.2%.

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

What the Zacks Model Predicts

Our proven model does not conclusively predict an earnings beat for Raymond James this time around. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better.

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).

Stocks Worth a Look

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 this time around:

BankUnited, Inc. (BKU - Free Report) is scheduled to announce quarterly numbers on Oct 28. The company has an Earnings ESP of +6.10% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Earnings ESP for CullenFrost Bankers, Inc. (CFR - Free Report) is +1.57% and the stock carries a Zacks Rank of 3, at present. The company is slated to report third-quarter numbers on Oct 29.

T. Rowe Price Group, Inc. (TROW - Free Report) is set to release earnings figures on Oct 29. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +1.95%.

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