Analysts at Barclays recently released a report discussing their outlook for brokers, asset managers and exchange stocks following a strong Q1 earning season for the group. Barclays reports that between 80 and 90 percent of the names they covered beat earnings estimates in Q1, while only between 50 and 60 percent beat Barclay’s revenue forecasts.
Neutral Overall Outlook
Barclays analysts believe that revenue challenges in the space will likely continue in the future and are cautious on most names they cover. By segment, Barclays is most above consensus expectations for eBrokers, near consensus on exchanges and below consensus on the outlook for traditional managers.
Segment Breakdown
Barclays predicts that near-term trading revenue will likely be weak after strong Q1 numbers, and upside for eBrokers might not materialize until the second half of the year.
Exchange volumes were “solid” in Q1, but are off to a sluggish start in Q2. For now, analysts believe that exchanges will likely focus on managing expenses and returning capital until the next pickup in volumes comes around in the late summer.
Analysts saw strong assets under management (AUM) growth from traditional managers in Q1, but are concerned by lagging revenue and remain wary of most names.
Top Picks
Despite Barclay’s Neutral outlook, they see plenty of pockets of opportunity for selective investors. Barclays has Overweight ratings on the following stocks:
- Charles Schwab Corp SCHW 2.43%
- E*TRADE Financial Corp ETFC 2.37%
- Intercontinental Exchange Inc ICE 0.74%
- Invesco Ltd. IVZ 0.36%
- Kohlberg Kravis Roberts & Co LP KKR 0.13%
- NASDAQ OMX Group, Inc. NDAQ 0.5%
- RCS Capital Corp RCAP 7.09%
- TD Ameritrade Holding Corp. AMTD 1.95%
- Blackstone Group LP BX 0.21%
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