E*TRADE Financial Corporation (ETFC) is scheduled to report third-quarter 2014 results, after the market closes on Tuesday, Oct 21.
E*TRADE Financial started 2014 on a strong note, reflecting its efforts toward achieving growth and profitability. In the preceding quarter, the company delivered a positive earnings surprise of 4.35%, mainly driven by higher net operating interest income and a rise in total daily average revenue trades (DARTs). In the trailing four quarters, the company recorded an average earnings beat of 23.92%.
Will E*TRADE Financial be able to keep the earnings streak alive after combating the industry challenges during the quarter? Let's see what factors might have influenced the earnings report this time around.
Factors to Influence Q3 Results
E*TRADE Financial possesses some encouraging traits that may support its results. The company’s initiatives to reduce balance sheet risk are a positive for the quarter, although these will put near-term pressure on the net interest margin.
Further, even as the trading activity moderated in the industry, E*TRADE Financial continued to grow its brokerage business. The rise in net new brokerage accounts should have a positive impact on revenue in this quarter.
Volatility in the market as well as disengagement of the retail traders may put DARTs under pressure in the quarter. Further, the unfavorable macro issues may weigh on E*TRADE Financial’s top line.
However, the company’s monthly activity updates, since Apr 2014, affirm an overall increase total customer assets.
E*TRADE Financial’s activities during the quarter were not sufficient to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter declined by a penny to 88 cents per share over the last 7 days.
Earnings Whispers
Our proven model does not conclusively show that E*TRADE Financial is likely to beat the Zacks Consensus Estimate in the third quarter. That is 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. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: The Earnings ESP for E*TRADE is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 22 cents per share.
Zacks Rank: E*TRADE Financial’s Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise call.
Stocks That Warrant a Look
E*TRADE Financial is not the only firm looking up this earnings season. We also expect earnings beats from other companies in this industry:
World Acceptance Corp. (WRLD) has an Earnings ESP of +1.38% and carries a Zacks Rank #2. The company is slated to release results on Oct 22.
Arlington Asset Investment Corp. (AI) has an Earnings ESP of +7.34% and sports a Zacks Rank #1. It is scheduled to report results on Oct 27.
CIT Group Inc. (CIT) has an Earnings ESP of +11.36% and a Zacks Rank #3. It is slated to report results on Oct 28.
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