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First Republic (FRC) Q4 Earnings: Disappointment in Store?


First Republic Bank FRC is scheduled to report fourth quarter and 2018 earnings, before the opening bell on Jan 15. Its revenues and earnings are expected to grow year over year.

The company’s third-quarter earnings lagged the Zacks Consensus Estimate on higher expenses and non-performing assets. However, considerable rise in loans and deposit balances came as a tailwind.

First Republic has a decent earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters, the average beat being 1.4%.

However, its activities in the fourth quarter failed to encourage analysts. As a result, the Zacks Consensus Estimate for earnings of $1.24 for the to-be-reported quarter has been revised slightly downward over the past seven days. Nevertheless, it reflects a year-over-year improvement of 12.7%.

Also, the Zacks Consensus Estimate for sales of $790.3 million indicates an increase of 13% year over year.

First Republic Bank Price and EPS Surprise

Here are the other factors influencing First Republic’s fourth-quarter results:

Muted Loan Growth: Per the Fed’s latest data, loans are likely to show modest growth in the fourth quarter. Particularly, slowdown in home equity lines of credit, commercial real estate and consumer loans is likely to impact First Republic’s loan portfolio.

Non-Interest Revenues to Disappoint: Investment banking is anticipated to display a disappointing performance for the to-be-reported quarter due to a considerable reduction in equity underwriting volumes globally on trade-war fears.

Further, rise in interest rates is likely to have slowed down companies’ involvement in debt issuance activities. Also, decline in global M&A deal volume in the fourth quarter will likely hamper related fees to some extent.

Expenses Might Rise: First Republic’s investments in digital initiatives, including mobile banking applications and data analytics are likely to keep costs elevated in this quarter as well.

Also, decline in global M&A deal volume in the fourth quarter will likely hamper the company’s advisory fees to some extent.

Now, let’s have a look at what our quantitative model predicts:

According to our quantitative model, chances of First Republic beating the Zacks Consensus Estimate in the fourth quarter are low. This is because it does not have the right combination of the two key ingredients — a 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 First Republic is -0.04%.

Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).

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.

E*TRADE Financial Corporation ETFC is scheduled to release results on Jan 24. It has an Earnings ESP of +0.96% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ares Capital Corporation ARCC is slated to release results on Feb 12. It has an Earnings ESP of +1.38% and carries a Zacks Rank #2.

Macro Bank Inc. BMA has an Earnings ESP of +2.17% and sports a Zacks Rank of 1. The company is slated to release results on Feb 18.

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