Cohen & Company heads into its September-quarter report with an awkward contradiction. Three months ago management delivered its strongest banking quarter in recent memory and spoke with noticeably more confidence. Since then the stock has lost more than a quarter of its value, and analysts are bracing for a sharp contraction in results. The report due before the open on November 12 will show whether last quarter was the start of a durable upswing or another peak in a business that lives and dies by the SPAC calendar.
The consensus bar is low. Analysts expect earnings of about $0.42 per share on revenue of roughly $40.8 million. That would be an 84.5% drop in EPS from the $2.71 earned a year ago and a 51.6% decline in revenue from $84.2 million. Revenue would also fall about 41% from the prior quarter's $69.5 million. Management does not issue formal guidance, so there is no company range to measure the Street against. Instead, the forecast reflects an assumption that the deal surge behind last quarter's results will not repeat at the same pace.
That assumption goes to the heart of what management said on the last call. Investment banking and new issue revenue climbed to $54.0 million from $45.7 million the quarter before. Adjusted pre-tax income more than doubled to $10.1 million. The CEO talked about momentum, but he also conceded that SPAC activity tends to come in bursts followed by cooling periods. He declined to size the pipeline beyond saying it looked similar to recent quarters. Banking revenue that holds near the $45 million to $54 million band of the past two quarters would make the consensus look overly cautious. A slide toward the low $30 millions would confirm that the earlier strength was episodic.
The specific catalysts introduced last quarter deserve close attention. Columbus Circle Capital III completed a $230 million IPO in July, which falls inside this reporting period and should show up in new issue activity and in the value of the roughly 2.28 million founder shares the firm holds. The Elroy Air combination with Columbus Circle II is not expected to close until the fourth quarter. Even so, any change in timing, redemption expectations or the Inflection Point partnership will matter. The vehicle produced a $3.0 million equity-method loss last quarter, and the firm forfeits about 360,000 placement units when the deal closes. A slip in the schedule would push a key earnings event further out.
The steadier businesses should help limit the downside. Net trading revenue edged up to $13.9 million, helped by mortgage, structured notes and CMO desks, and the gestation repo book grew to $4.1 billion. Continued growth there would suggest the fixed income franchise can carry more of the load when deal flow slows. Asset management, by contrast, keeps shrinking as legacy CDO contracts wind down, and principal transactions are still slightly negative. Compensation, which rose on higher variable pay, is the main lever for protecting margins if revenue drops as much as expected.
Sentiment has soured. Bearish readings rose to about 61% from roughly 44% ahead of the last report. The stock trades near $10, well below last quarter's $10.39 low and closer to the $8.93 floor of its post-earnings range than to the $15.85 high. Much of the pessimism looks priced in. The report's real test is whether Cohen can show that trading, repo financing and a steady SPAC pipeline give it a floor that does not depend on one big quarter of deals.