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Barclays (BCS) to Report Q4 Earnings: What's in the Cards?

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Barclays BCS is slated to announce fourth-quarter and 2019 results on Feb 13, before the opening bell. For the quarter, it is expected to record year-over-year improvement in earnings and revenues.

Rise in credit impairment charges adversely impacted the company’s results in the last reported quarter. However, fall in operating expenses along with higher revenues were tailwinds.

Notably, the Zacks Consensus Estimate for earnings of 21 cents for the fourth quarter has been unchanged over the past 30 days, reflecting that analysts are not very optimistic regarding the company’s earnings growth potential. Nevertheless, the figure indicates significant improvement from the prior-year quarter’s reported number.

The consensus estimate for sales for the to-be-reported quarter is pegged at $6.77 billion, suggesting a rise of 3.8% on a year-over-year basis.

Barclays PLC Price and EPS Surprise
 

Barclays PLC Price and EPS Surprise

Barclays PLC price-eps-surprise | Barclays PLC Quote

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

Key Factors to Note:

Investment banking revenues: Solid equity market performance and the central banks’ accommodative stance drove corporates to issue equities across the globe. Moreover, bond issuance volumes were solid, while debt issuances were muted as corporate loan demand was weak. Hence, growth in Barclays’ equity underwriting fees and debt origination fees are likely to have been decent in the fourth quarter.

While dealmakers were active during the fourth quarter, global deal value and volume declined due to several geopolitical concerns. Thus, the company’s advisory fees are likely to have been negatively impacted. Nonetheless, the strong M&A deal pipeline from the previous quarters might have offered some respite.

Trading revenues: Ambiguity over the U.S.-China trade conflict and Brexit, expectations of global economic downturn, the Federal Reserve’s accommodative stance and a number of happenings in the latter part of the fourth quarter along with strong domestic economy kept trading desks busy and resulted in a rise in client activities.

Solid equity market performance resulted in an increase in equity trading, while settlement of a few macroeconomic and geopolitical concerns aided fixed-income trading. Therefore, overall growth in trading revenues is expected to have been decent for the to-be-reported quarter.

Net interest income (NII): Low interest rate environment across several major economies is likely to have continued to hamper interest income growth. Further, Brexit-related uncertainty might have had an unprecedented adverse effect on Barclays’ financials. Therefore, growth in NII in the fourth quarter is expected to have been weak.

Expenses: Barclays’ cost control measures have been leading to improved efficiency and lower cost-to-income ratio. Nevertheless, because of several legal and other regulatory expenses, overall costs might have increased slightly in the quarter.

Management expects operating expenses (excluding litigation and conduct charges) for 2019 to be below £13.6 billion.

Now, let’s check what our quantitative model predicts.

According to our quantitative model, it cannot be conclusively predicted whether Barclays will be able to beat the Zacks Consensus Estimate this time. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to be confident of an earnings surprise call.

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 Barclays is 0.00%.

Zacks Rank: The company currently has a Zacks Rank #3. While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings beat.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other finance stocks, Fidelity National Information Services, Inc. FIS, Essent Group Ltd. ESNT and Main Street Capital Corporation MAIN are slated to release results on Feb 13, Feb 14 and Feb 27, respectively.

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