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Will Muted Trading Income Hurt E*TRADE's (ETFC) Q1 Earnings?

Zacks Equity Research

E*TRADE Financial Corporation ETFC is scheduled to report first-quarter 2019 results on Apr 17. The company is expected to witness year-over-year growth in revenues and earnings.

In the last reported quarter, E*TRADE pulled off a positive earnings surprise of 0.95%, supported by increased net revenues and benefit from provisions. Further, the quarter witnessed an increase in daily average revenue trades (DARTs), along with growth in customer accounts.

In addition, E*TRADE has an impressive earnings surprise history. It delivered positive earnings surprises in each of the trailing four quarters, average beat being 9.89%.

E*TRADE Financial Corporation Price and EPS Surprise

E*TRADE Financial Corporation Price and EPS Surprise | E*TRADE Financial Corporation Quote

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Estimates for the to-be-reported quarter have remained unchanged, over the last seven days. Notably, the Zacks Consensus Estimate for earnings reflects 6.8% growth year over year.

Factors That Might Influence Q1 Results

Trading Revenues to Disappoint: Despite strong equity markets and a rise in Treasury bonds, low volumes and reduced client activity were witnessed in the first quarter, partly on the U.S. government shutdown and other prevailing economic uncertainties. Notably, E*TRADE opened 48,211 and 54,706 gross new brokerage accounts in January and February, respectively, indicating that investors were interested in entering the market. Therefore, growth in brokerage accounts might provide some respite to trading revenues.

Notably, expected fall in DARTs in the quarter will impact commission revenues. The consensus estimate for DARTs is 294,617, slightly down sequentially.

Interest Income Might Trend Upward: As net interest income constitutes a significant part of E*TRADE’s revenues, expanding net interest margin on the back of rising interest rates will likely lend support this quarter as well. Also, some support to interest income will be provided by rise in average interest earning assets.

Notably, the consensus estimate for sales is $741 million, indicating improvement of 4.7% from the year-ago quarter.

Expenses Might Trend Up: The company plans to make several investments, along with spending money on marketing. This might escalate expenses during the quarter under review.

Earnings Whispers

According to our quantitative model, E*TRADE doesn’t have the right combination of the two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.

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 E*TRADE is 0.00%.

Zacks Rank: It carries a Zacks Rank #3, which increases the predictive power of ESP. But we need to have positive earnings ESP to be sure of earnings beat.

Stocks That Warrant a Look

Here are some stocks you may want to consider, as according to our model these have the right combination of elements to post an earnings beat this quarter.

Northern Trust Corporation NTRS is slated to release results on Apr 23. The company has an Earnings ESP of +0.57% and currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Bank of New York Mellon Corporation BK is scheduled to report earnings figures on Apr 17. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +0.63%.

The Earnings ESP for BankUnited, Inc. BKU is +1.89% and it carries a Zacks Rank of 3, currently. The company is set to report quarterly numbers on Apr 24.

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The Bank of New York Mellon Corporation (BK) : Free Stock Analysis Report
 
BankUnited, Inc. (BKU) : Free Stock Analysis Report
 
Northern Trust Corporation (NTRS) : Free Stock Analysis Report
 
E*TRADE Financial Corporation (ETFC) : Free Stock Analysis Report
 
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Zacks Investment Research