Raymond James Reports Robust Earnings

Zacks

Raymond James Financial Inc. (RJF) reported strong results on the back of impressive growth in net revenue. The company's fiscal fourth-quarter 2013 (ended Sep 30) earnings per share of 93 cents handily beat the Zacks Consensus Estimate of 63 cents. Moreover, this was up 35% from the prior-year quarter figure of 69 cents.

Better-than-expected quarterly results benefited from top-line growth, partly offset by higher expenses. Further, considerable rise in assets under management (:AUM) and assets under administration were among the positives.

GAAP net income for the reported quarter came in at $117.5 million or 82 cents per share, compared with $83.3 million or 60 cents per share in the prior-year quarter.

Further, for fiscal 2013, earnings per share of $2.95 outpaced the Zacks Consensus Estimate of $2.64 and the prior-year figure of $2.51. Also, GAAP net income came in at $367.2 million or $2.58 per share, compared with $295.9 million or $2.20 per share in the prior year.

Behind the Headlines

Raymond James’ total revenue for the quarter came in at $1,150.3 million, climbing 5% year over year. The rise was mainly attributable to increase in securities commissions and fees, investment banking, investment advisory fees as well as account and service fees. These were partially offset by a fall in other revenues and interest income. Also, this surpassed the Zacks Consensus Estimate of $1,116.0 million.

For fiscal 2013, total revenue was $4,595.8 million, increasing 18% year over year. Further, this was ahead of the Zacks Consensus Estimate of $4,478.0 million.

Non-interest expenses rose 2% from the prior-year quarter to $964.8 million. This was primarily due to increase in compensation and benefits expenses, communications and information processing, investment sub-advisory fees, acquisition related expenses and other expenses. These were partly offset by a fall in clearance and floor brokerage costs.

As of Sep 30, 2013, client assets under administration rose 10% year over year to $425.4 billion. Similarly, financial AUM totaled $56.0 billion, increasing 31% from $42.8 billion as of Sep 30, 2012.

Balance Sheet

As of Sep 30, 2013, Raymond James reported total assets of $23.2 billion, up 9% year over year. Shareholders’ equity came in at $3.7 billion, increasing 12% from $3.27 billion in the prior-year.

Book value per share as of Sep 30, 2013 was $26.40, up from $24.02 as of Sep 30, 2012.

Performance of Other Brokerage Firms

Interactive Brokers Group, Inc.’s (IBKR) third-quarter 2013 earnings were in line the Zacks Consensus Estimate. Results were primarily driven by top-line growth and lower operating expenses.

The Charles Schwab Corporation’s (SCHW) third-quarter 2013 earnings marginally beat the Zacks Consensus Estimate. Better-than-expected results were driven by top-line growth and a benefit from provision, partially offset by higher expenses.

Among other major investment brokers, TD Ameritrade Holding Corporation (AMTD) is scheduled to report fiscal fourth-quarter 2013 results on Oct 29. The company’s Zacks Earnings ESP of 0.00% and Zacks Rank #2 (Buy) reduce the chances of a positive earnings surprise.

Our Take

Raymond James’ strong balance sheet and its efforts to boost revenues by recruiting experienced advisors will likely strengthen the company’s financials, going forward. Moreover, Raymond James’ robust capital position and capital deployment activities are expected to make its stock attractive for yield-seeking investors. However, regulatory issues, a low interest-rate environment, sluggish economic growth and persistently rising expenses will likely pose as headwinds.

Currently, Raymond James carries a Zacks Rank #4 (Sell).

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