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LPL Financial Beats on Earnings and Revs

Zacks Equity Research

In continuation with its earnings streak, LPL Financial Holdings Inc.’s (LPLA) fourth-quarter 2013 adjusted earnings per share of 63 cents surpassed the Zacks Consensus Estimate of 55 cents. Further, this was up 26.0% from 50 cents earned in the year-ago quarter.

For full-year 2013, LPL Financial recorded earnings per share of $2.44 versus $2.03 in 2012. Earnings for the year also beat the Zacks Consensus Estimate of $2.29.

Results benefited from consistent growth in the top line and steady share buybacks, which were partially offset by rising expenses. In 2013, the weighted average share count declined 4.8% to 103.4 million due to the regular buybacks. Consequently, this contributed to a rise in earnings per share. Further, growth in assets under custody was a tailwind for the quarter.

LPL financial reported adjusted earnings of $65.2 million, up 21.1% from $53.9 million in prior-year quarter. For full-year 2013, the figure was $258.8 million, up 15% from 2012.

Performance Highlights

Net revenue came in at $1.09 billion, up 15.9% year over year. The top-line growth was primarily driven by rise in other revenues as well as advisory and commission fee. Moreover, total revenue beat the Zacks Consensus Estimate of $1.07 billion.

For 2013, total revenue came in at $4.1 billion, up 13.1% from $3.7 billion in 2012. Moreover, total revenue surpassed the Zacks Consensus Estimate of 4.0 billion.

Total expenses came in at $1.0 billion, up 16.9% on a year-over-year basis. The increase was due to rise in all the components of operating expense except for other expenses.

Non-operating expense, net of non-controlling interests, was recorded at $13.3 million, up 5.8% from prior-year quarter.

Advisory assets under custody totaled $151.6 billion as of Dec 31, 2013, up 24.2% from the comparable year-ago period.

Capital Deployment Activity

In the reported quarter, LPL Financial repurchased 0.9 million shares for $34.8 million. In full-year 2013, the company bought back 5.8 million shares for $219.1 million.

Further, management has authorized an additional share repurchase of $150 million, thereby increasing the existing share buyback authorization to $218 million.

Along with the earnings release, the company announced a cash dividend to 24 cents, which marked a hike of 26% from the prior disbursement. The dividend will be paid on Mar 10 to stockholders of record as of Feb 24.

Performance of Other Investment Brokers

Among other investment management firms, while The Charles Schwab Corporation (SCHW) beat the Zacks Consensus Estimate aided by higher revenues, Interactive Brokers Group, Inc. (IBKR) lagged the Zacks Consensus Estimate due to increased expenses.

E*TRADE Financial Corporation’s (ETFC) earnings came in line with the Zacks Consensus Estimate. Rise in total daily average revenue trades, along with reduced delinquencies, were positives for the quarter.

Our Viewpoint

LPL Financial’s sound capital deployment activities continue to boost shareholders’ confidence. Moreover improved advisory activity will benefit the company in the long run. However, rising expenses and a sluggish economic scenario remain causes of concern.

LPL Financial currently carries a Zacks Rank #1 (Strong Buy).

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