E*TRADE Financial Corporation ETFC is scheduled to report first-quarter 2015 results after the market closes on Thursday, Apr 23.
The company delivered a strong performance in 2014, backed by its efforts to boost growth and profitability. Notably, the company delivered positive surprises in all the trailing four quarters, with an average beat of 23.2%.
Will E*TRADE Financial be able to keep the earnings streak alive this quarter? Let's see what factors might have influenced the earnings report this time around.
Factors to Influence Q1 Results
E*TRADE Financial possesses some encouraging traits that are likely to benefit the first-quarter results. In sync with its focus on reducing balance-sheet risk, the company announced a debt restructuring plan to lower outstanding corporate debt and refinance its existing notes, thereby ensuring healthy liquidity position. Such restructuring initiatives are predicted to bear fruit in the form of lower interest expense and an improvement in overall credit profile.
Moreover, monthly metrics for January and February exhibited increased trading activities in the form of rising DARTS and net new brokerage assets. Such increase signals higher brokerage fee and commission income, and overall improved performance of the Trading and Investing segment.
Further, management expects gains on loans and securities in the range of $5–$10 million during the first quarter.
Additionally, aforementioned restructuring efforts are expected to modestly enhance Balance Sheet Management segment’s results. Also, the quarterly run-off of the loan portfolio is projected in the range of 4–5%.
On the expense front, legal, risk and compliance-related costs are anticipated to trend higher during the quarter, along with a rise in salaries and marketing space. Adding to the woes, provision for credit losses are predicted within $10–$15 million, indicating no relief in the quarter.
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 8.7% to 20 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 Financial is 0.00%. This is because the Most Accurate estimate as well as the Zacks Consensus Estimate stands at 21 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
Here are a few finance stocks you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
The Earnings ESP for Brookfield Asset Management Inc. BAM is +2.99% and it has a Zacks Rank #2. The company is slated to report on May 6.
Popular, Inc. BPOP has an Earnings ESP of +9.86% and sports a Zacks Rank #1. It is scheduled to report on Apr 27.
FCB Financial Holdings, Inc. FCB, with an Earnings ESP of +2.70% and a Zacks Rank #1, is scheduled to report results on Apr 23.
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