Raymond James Beats on Earnings, Revs

Zacks

Raymond James Financial Inc. (RJF) reported impressive results on the back of strong performance by its asset management and private client group divisions. The company's fiscal first-quarter 2014 earnings per share of 81 cents outpaced the Zacks Consensus Estimate of 73 cents. Moreover, this was significantly above the prior-year quarter figure of 61 cents.

Results benefited from top-line growth, partly offset by higher expenses. Further, a considerable rise in assets under discretionary management and assets under administration were among the positives.

Non-GAAP net income stood at $116.7 million, up 21% year over year.
GAAP net income for the reported quarter came in at $116.7 million or 81 cents per share, compared with $85.9 million or 61 cents per share in the prior-year quarter.

Behind the Headlines

Raymond James’ total revenue for the quarter came in at $1.2 billion, climbing 6% year over year. The rise was mainly attributable to increase in securities commissions and fees, investment advisory fees as well as account and service fees. These were partially offset by a fall in investment banking revenue and interest income. Also, this surpassed the Zacks Consensus Estimate of $1.1 billion.

Non-interest expenses rose 4% from the prior-year quarter to $1.0 billion. This was primarily due to increase in compensation and benefits expenses, business development costs and investment sub-advisory fees, partly offset by a fall in clearance and floor brokerage costs.

As of Dec 31, 2013, client assets under administration rose 15.1% year over year to $446.5 billion while assets under discretionary management climbed 30.1% to $60.5 billion.

Balance Sheet

As of Sep 30, 2013, Raymond James reported total assets of $21.9 billion, down 1.8% year over year. Shareholders’ equity came in at $3.8 billion, increasing 11.9% from $3.4 billion in the prior-year.

Book value per share as of Dec 31, 2013 was $27.07, up from $24.59 as of Dec 31, 2012.

Our Take

In tune with its robust results in fiscal 2013, Raymond James started fiscal 2014 on a positive note.  A strong balance sheet and continued efforts to boost segmental performances are likely to strengthen the company’s financials going forward.

However, regulatory issues, a low interest-rate environment, sluggish economic growth and persistently rising expenses are likely to pose as headwinds.

Currently, Raymond James carries a Zacks Rank #2 (Buy)

Performance of Other Investment Brokerage Firms
I
Interactive Brokers Group, Inc.’s (IBKR) reported fourth-quarter earnings per share of 7 cents, missing the Zacks Consensus Estimate of 15 cents. Results were primarily affected by higher operating expenses and a weak performance in its Market Making segment.

The Charles Schwab Corp.’s (SCHW) fourth-quarter 2013 earnings of 23 cents per share beat the Zacks Consensus Estimate of 21 cents. Results benefited from top-line growth and a benefit from provision, partially offset by higher expenses.

TD Ameritrade Holding Corp. (AMTD) reported fiscal first-quarter 2014 earnings of 35 cents per share, which beat the Zacks Consensus Estimate of 32 cents. Better-than-expected results came on the back of increased revenues, partially offset by higher expenses.

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