Can Interest Income Support E*TRADE's (ETFC) Earnings in Q3?

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E*TRADE Financial Corporation ETFC is scheduled to report third-quarter 2018 results on Oct 18. 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 6.7% 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. However, the positives were partially offset by higher expenses.

Further, E*TRADE has an impressive earnings surprise history. It delivered positive earnings surprises in each of the trailing four quarters with an average beat of 7.3%.

E*TRADE Financial Corporation Price and EPS Surprise

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

Estimates for the to-be-reported quarter have remained stable at 83 cents over the last seven days. Notably, the Zacks Consensus Estimate for earnings reflects growth of 50.9% year over year.

Factors That Might Influence Q3 Results

Trading Revenues Might Improve: Though market volatility during the third quarter remained subdued compared with first-half 2018, E*TRADE's trading revenues might have witnessed improvement on the back of rise in net new brokerage accounts. The Zacks Consensus Estimate for these accounts is 45,000, up 71.6% year over year.

Further, as the company reported annual increase in DARTs for the months of July and September, commission revenues are likely to have increased during the quarter. The consensus estimate for DARTs is 266,000, up 29.2% year over year.

Interest Income Might Trend Upward: As net interest income constitutes a significant part of E*TRADE's revenues, expanding net interest margin (NIM) on the back of rising interest rates will likely lend support this quarter as well. The consensus estimate for NIM indicates a year-over-year rise of 22 basis points to 3.07%.

Also, some support to interest income will be provided by rise in average interest earning assets. The Zacks Consensus Estimate of $61.2 billion reflects a year-over-year increase of 9.8%.

Notably, the consensus estimate for sales is $715.2 million, indicating improvement of 19.4% from the year-ago quarter.

Expenses Might Trend Up: The company plans to make several investments in 2018 along with spending money on marketing. This might lead to an increase in expenses during the quarter.

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: The stock currently carries a Zacks Rank #2 (Buy).

Stocks That Warrant a Look

Here are some stocks worth considering, as they have the right combination of elements to post an earnings beat this quarter.

Franklin Resources BEN is slated to release results on Oct 25. It has an Earnings ESP of +0.68% and carries a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

T. Rowe Price Group, Inc. TROW is scheduled to release results on Oct 25. It has an Earnings ESP of +0.78% and carries a Zacks Rank of 2.

Invesco Ltd. IVZ has an Earnings ESP of +0.38% and carries a Zacks Rank of 3. The company is slated to release results on Oct 24.

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E*TRADE Financial Corporation (ETFC): Free Stock Analysis Report

Franklin Resources, Inc. (BEN): Free Stock Analysis Report

Invesco Ltd. (IVZ): Free Stock Analysis Report

T. Rowe Price Group, Inc. (TROW): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: ETFC , BEN , IVZ , TROW

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