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Investment Management Earnings on Jul 18: GS, IBKR & AMTD

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Investment management (part of the broader Finance sector) performed decently over the last several quarters. Muted volatility in the second quarter led to low capital markets business, with reduced treasury yields affecting the margins.

The S&P 500 recorded a total return of 3.1% in the second quarter. Though the U.S. equity market recorded positive returns amid mixed economic data, it underperformed both non-U.S. developed and emerging markets.

Trading revenues are expected to decrease, mainly due to low volatility in both bond and equity markets. Apart from this, the global M&A activity remained dismal. Per the Thomson Reuters data, the total deal value of announced M&As globally fell during the quarter. Debt underwriting was disappointing as well. Also, while overall investment banking income is likely to witness a decline, equity underwriting is anticipated to improve.

Notably, per our Earnings Preview report, overall earnings for the Investment managers in second-quarter 2017 are expected to be down 5.7%.

So, let’s have a look at the three investment management stocks that are scheduled to report earnings tomorrow.

The Goldman Sachs Group, Inc. (GS - Free Report) is slated to announce results before the opening bell. The company has a Zacks Rank #4 (Sell) with Earnings ESP of -1.43%. Therefore, our quantitative model doesn’t call for an earnings beat this time around. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Talking about the factors affecting earnings, the first and foremost is top-line headwinds. Trading revenues are expected to decrease year over year, mainly due to low volatility in both bond and equity markets. Further, the global M&A activity remained dismal. Debt underwriting was soft as well. Also, overall investment banking income is likely to experience a decline, though equity underwriting might improve. Nevertheless, these are likely to be counterbalanced by disciplined expense management (read more: Will Bleak Trading Revenue Hurt Goldman's Q2 Earnings?).

However, Goldman boasts an impressive surprise history as indicated by the chart below:
 

Interactive Brokers Group, Inc. (IBKR - Free Report) is scheduled to announce its quarterly numbers after the market closes. The Zacks Consensus Estimate of 33 cents for the company for the upcoming release reflects year-over-year decline of about 16.67%. However, Interactive Brokers’ activities during the quarter were adequate to win analysts’ confidence, as evident from one positive revision in earnings estimates (versus no negative revision), over the last 30 days. Notably, the Zacks Consensus Estimate moved up 6.5% over the same time frame.

Further, our quantitative model predicts an earnings beat. The company has a Zacks Rank #2 (Buy), with an Earnings ESP of +15.15%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, Interactive Brokers has a disappointing earnings surprise history, as apparent from the chart given below:
 

TD Ameritrade Holding Corporation (AMTD - Free Report) will announce results before the market opens. With the June quarter being seasonally sluggish, the company is expected to observe low trading activity as the quarter witnessed muted volatility. Further, expense is likely to increase, given the company’s ongoing investments in technology, and advice and guidance offerings. However, on rising interest rates further, the NIM is anticipated to escalate (read more: TD Ameritrade Q3 Earnings: Is a Beat in the Cards?).

Notably, the earnings surprise history for TD Ameritrade is disappointing as depicted below:
 

Irrespective of an earnings beat or miss, investors should focus on companies’ fundamentals to make investment decisions. Therefore, don’t forget to check our full write-up on earnings releases of these stocks later.

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