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Poor Investment Banking to Hurt Raymond James (RJF) Q3 Earnings
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Raymond James (RJF - Free Report) is scheduled to announce third-quarter fiscal 2022 (ended Jun 30) results on Jul 27, after market close. While earnings are expected to have witnessed a fall on a year-over-year basis, revenues are likely to have improved.
In the last reported quarter, the company’s earnings lagged the Zacks Consensus Estimate. Results were adversely impacted by a rise in expenses and disappointing investment banking (IB) performance. Yet, higher interest income and a rise in loan demand acted as tailwinds.
Raymond James has a decent earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three and lagged in one of the trailing four quarters, the surprise being 12.8%, on average.
Raymond James Financial, Inc. Price and EPS Surprise
The Zacks Consensus Estimate for the company’s fiscal third-quarter earnings is pegged at $1.63, which has been unchanged over the past seven days. The figure indicates a decline of 10.9% from the year-ago quarter’s reported number.
The consensus estimate for sales of $2.60 billion suggests 5.3% year-over-year growth.
Factors to Influence Q3 Results
Investment Banking Fees: After an extraordinary performance for almost two years, deal-making across the globe came to almost a halt in the June-end quarter. Raging inflation, equity market rout (with the S&P 500 Index witnessing the worst first-half performance in more than 50 years) and fears of a recession dealt a huge blow to business sentiments and plans for expansion through acquisitions. Thus, both deal volume and total deal value crashed in the quarter under review, because of which Raymond James’ advisory fees are likely to have been hurt.
Given the above-mentioned concerns, the equity market performance was disappointing in the to-be-reported quarter and thus, IPOs and follow-up equity issuances dried up. Likewise, bond issuance volumes are likely to have been muted. Thus, RJF’s underwriting fees are expected to have been negatively impacted in the quarter.
The consensus estimate for IB fees is pegged at $189 million, suggesting a 19.6% decline from the previous quarter’s reported figure.
Trading Revenues: After witnessing a gradual normalization in the second half of last year, trading activities surprisingly rebounded in the Mar 2022-end quarter, with the trend continuing thereafter. The Russia-Ukraine conflict continued to disrupt supply chains, leading to global ambiguity. Further, fears of an economic slowdown, 40-year-high inflation numbers and rising interest rates worldwide resulted in heightened client activities and increased trading volumes.
These factors led to higher volatility in the equity markets and other asset classes, including bonds, commodities and foreign exchange. Thus, Raymond James’ trading revenues are likely to have been decent in the to-be-reported quarter.
Interest Income: The overall loan demand was quite impressive in the quarter under review. Thus, driven by loan growth, along with higher interest rates, Raymond James’ interest income is expected to have improved.
The consensus estimate for fiscal third-quarter net interest income is pegged at $2.7 billion, indicating a substantial rise sequentially.
Expenses: Raymond James consistently hires advisors and invests in franchises. Thus, overall expenses are expected to have risen in the quarter. Moreover, due to a highly competitive environment, costs are expected to have been elevated.
Key Development in Q3
In June, Raymond James completed the acquisition of TriState Capital Holdings to further diversify its deposit gathering capabilities and revenue mix. The cash-cum-stock deal was announced in October 2021.
Per the deal, each share of TriState Capital common stock was converted into the right to receive $6.00 in cash and 0.25 shares of Raymond James' common stock, which represents a per-share consideration of $30.62.
Moreover, each share of TriState Capital’s Series C Perpetual Non-Cumulative Convertible Non-Voting Preferred Stock was converted into the right to receive $30 per share of the TriState Capital common stock into which such Series C preferred stock was convertible.
Further, each share of TriState Capital’s 6.75% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock and each share of TriState Capital’s 6.375% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock was converted, respectively, into the right-to-receive one share of a newly created series A and series B preferred stock of Raymond James.
At the time of the deal announcement, it was expected that in the first full year post completion, the transaction would be accretive to earnings (excluding acquisition-related charges), with more than 8% accretive to earnings after the third year.
What the Zacks Model Predicts
According to our proven model, the chances of Raymond James beating the Zacks Consensus Estimate this time are high. This is because it has 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 +1.02%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Other Stocks Worth a Look
A couple of other finance stocks that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this time around, are SouthState Corporation (SSB - Free Report) and LPL Financial (LPLA - Free Report) .
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Poor Investment Banking to Hurt Raymond James (RJF) Q3 Earnings
Raymond James (RJF - Free Report) is scheduled to announce third-quarter fiscal 2022 (ended Jun 30) results on Jul 27, after market close. While earnings are expected to have witnessed a fall on a year-over-year basis, revenues are likely to have improved.
In the last reported quarter, the company’s earnings lagged the Zacks Consensus Estimate. Results were adversely impacted by a rise in expenses and disappointing investment banking (IB) performance. Yet, higher interest income and a rise in loan demand acted as tailwinds.
Raymond James has a decent earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three and lagged in one of the trailing four quarters, the surprise being 12.8%, on average.
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 the company’s fiscal third-quarter earnings is pegged at $1.63, which has been unchanged over the past seven days. The figure indicates a decline of 10.9% from the year-ago quarter’s reported number.
The consensus estimate for sales of $2.60 billion suggests 5.3% year-over-year growth.
Factors to Influence Q3 Results
Investment Banking Fees: After an extraordinary performance for almost two years, deal-making across the globe came to almost a halt in the June-end quarter. Raging inflation, equity market rout (with the S&P 500 Index witnessing the worst first-half performance in more than 50 years) and fears of a recession dealt a huge blow to business sentiments and plans for expansion through acquisitions. Thus, both deal volume and total deal value crashed in the quarter under review, because of which Raymond James’ advisory fees are likely to have been hurt.
Given the above-mentioned concerns, the equity market performance was disappointing in the to-be-reported quarter and thus, IPOs and follow-up equity issuances dried up. Likewise, bond issuance volumes are likely to have been muted. Thus, RJF’s underwriting fees are expected to have been negatively impacted in the quarter.
The consensus estimate for IB fees is pegged at $189 million, suggesting a 19.6% decline from the previous quarter’s reported figure.
Trading Revenues: After witnessing a gradual normalization in the second half of last year, trading activities surprisingly rebounded in the Mar 2022-end quarter, with the trend continuing thereafter. The Russia-Ukraine conflict continued to disrupt supply chains, leading to global ambiguity. Further, fears of an economic slowdown, 40-year-high inflation numbers and rising interest rates worldwide resulted in heightened client activities and increased trading volumes.
These factors led to higher volatility in the equity markets and other asset classes, including bonds, commodities and foreign exchange. Thus, Raymond James’ trading revenues are likely to have been decent in the to-be-reported quarter.
Interest Income: The overall loan demand was quite impressive in the quarter under review. Thus, driven by loan growth, along with higher interest rates, Raymond James’ interest income is expected to have improved.
The consensus estimate for fiscal third-quarter net interest income is pegged at $2.7 billion, indicating a substantial rise sequentially.
Expenses: Raymond James consistently hires advisors and invests in franchises. Thus, overall expenses are expected to have risen in the quarter. Moreover, due to a highly competitive environment, costs are expected to have been elevated.
Key Development in Q3
In June, Raymond James completed the acquisition of TriState Capital Holdings to further diversify its deposit gathering capabilities and revenue mix. The cash-cum-stock deal was announced in October 2021.
Per the deal, each share of TriState Capital common stock was converted into the right to receive $6.00 in cash and 0.25 shares of Raymond James' common stock, which represents a per-share consideration of $30.62.
Moreover, each share of TriState Capital’s Series C Perpetual Non-Cumulative Convertible Non-Voting Preferred Stock was converted into the right to receive $30 per share of the TriState Capital common stock into which such Series C preferred stock was convertible.
Further, each share of TriState Capital’s 6.75% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual Preferred Stock and each share of TriState Capital’s 6.375% Fixed-to-Floating Rate Series B Non-Cumulative Perpetual Preferred Stock was converted, respectively, into the right-to-receive one share of a newly created series A and series B preferred stock of Raymond James.
At the time of the deal announcement, it was expected that in the first full year post completion, the transaction would be accretive to earnings (excluding acquisition-related charges), with more than 8% accretive to earnings after the third year.
What the Zacks Model Predicts
According to our proven model, the chances of Raymond James beating the Zacks Consensus Estimate this time are high. This is because it has 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 +1.02%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Other Stocks Worth a Look
A couple of other finance stocks that you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this time around, are SouthState Corporation (SSB - Free Report) and LPL Financial (LPLA - Free Report) .
SouthState is slated to report quarterly results on Jul 28. SSB, which carries a Zacks Rank #2 (Buy) at present, has an Earnings ESP of +3.65%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
LPL Financial is scheduled to report quarterly earnings on Aug 2. LPLA currently sports a Zacks Rank of 1 and has an Earnings ESP of +0.13%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.