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Will Underwriting Fees Aid Raymond James (RJF) Q4 Earnings?

Raymond James Financial, Inc. RJF is scheduled to announce fourth-quarter and fiscal 2017 (ended Sep 30) results tomorrow, after the market closes. Its revenues and earnings are expected to grow year over year.

Improved investment banking drove the company’s fiscal third-quarter earnings, which beat the Zacks Consensus Estimate. This was partially offset by elevated expenses and slowdown in trading activities.

Analysts seem to be happy with the company’s business activities in the just concluded quarter. Hence, the Zacks Consensus Estimate moved 1.5% upward to $1.34, over the last 30 days. The earnings estimates reflect a year-over-year rise of 4.3%. Also, the Zacks Consensus Estimate for sales of $1.67 billion indicates 14.6% growth from the prior-year quarter.

Also, the stock has an impressive earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 13.4%.

Further, the company’s price performance has been decent as well. Its shares have jumped 24.6% so far this year compared with the industry’s gain of 8.4%.

Factors to Influence Q4 Results

Slight rise in underwriting fees: Driven by improving market conditions and chances of continued rise in interest rates in the future, the quarter witnessed an increase in debt issuance. Further, the quarter is likely to have recorded a slight improvement in equity issuance despite seasonality. So, both debt and equity underwriting fees for Raymond James are projected to rise in the to-be-reported quarter.

Muted advisory fee revenues growth: With the overall improvement in global M&A scenario during the quarter, Raymond James is expected to be able to generate decent advisory fees.

Trading income to fall due to lack of volatility: For the major part of the quarter, trading activities remained sluggish, largely due to low volatility in both bond and equity markets. Absence of any concrete development on the proposed financial reforms by the Trump administration and an unchanged monetary policy of the Fed were the primary reasons for the reduced volatility. Therefore, Raymond James will likely report dismal trading revenues.

Loan growth in RJ Bank to support interest income: With stabilizing economy, a rise in demand for loans and improvement in rates, RJ Bank segment is expected to record a rise in interest income.

Expenses to rise: Raymond James is expected to incur integration costs during the quarter as it continues to grow inorganically. Also, as the company persistently hires advisors and invests in franchises, overall expenses are expected to increase.

Earnings Whispers

Our proven model does not conclusively show that Raymond James is likely to beat earnings this time. That’s because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as elaborated below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The Earnings ESP for Raymond James is 0.00%.

Zacks Rank: Raymond James has a Zacks Rank #2, which increases the predictive power of ESP. But we need a positive ESP to be confident of an earnings surprise.

Stocks to Consider

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 in their upcoming releases:

Franklin Resources, Inc. BEN is slated to report fiscal fourth-quarter results on Oct 26. The stock has an Earnings ESP of +0.56% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lazard Ltd. LAZ has an Earnings ESP of +1.39% and a Zacks Rank of 2. It is scheduled to report third-quarter results on Oct 26.

Santander Consumer USA Holdings Inc.’s SC Earnings ESP is +6.54% and it carries a Zacks Rank #2. The company is slated to release third-quarter results on Oct 27.

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