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LPL Financial (LPLA) Q4 Earnings Beat Despite High Expenses

Zacks Equity Research

LPL Financial’s LPLA fourth-quarter 2019 adjusted earnings of $1.68 per share surpassed the Zacks Consensus Estimate of $1.62. The figure reflects an increase of 13% from the prior-year quarter.

Revenue growth, and an increase in total brokerage and advisory assets aided results. However, higher expenses acted as a headwind.

After taking into consideration non-recurring items, net income was $126.7 million, increasing 5% year over year.

For 2019, adjusted earnings of $7.17 per share surpassed the Zacks Consensus Estimate of $7.12. The figure reflects an increase of 35% from the previous year. Net income was $559.9 million, increasing 27% year over year.

Revenues Improve, Expenses Rise

Total quarterly net revenues were $1.45 billion, up 10% year over year. The rise was supported by an increase in almost all revenue components, except for transaction and fee income; and interest income, net of interest expenses. The reported figure marginally surpassed the Zacks Consensus Estimate of $1.44 billion.

For 2019, total net revenues were $5.62 billion, up 8% year over year. The figure surpassed the Zacks Consensus Estimate of $5.56 billion.

Total quarterly operating expenses increased 11% year over year to $1.25 billion. All expense components increased, except for professional services costs; brokerage, clearing and exchange-related costs; and other costs.

At the end of the fourth quarter, LPL Financial’s total brokerage and advisory assets were $764.4 billion, up 22% year over year.

Total net new assets were $8.8 billion at the end of the quarter, up from $5.9 billion recorded at the end of the prior-year quarter. Total client cash balances decreased 3% year over year to $33.7 billion.

Balance Sheet Position

As of Dec 31, 2019, the company had total assets of $5.88 billion, up 7% from the Dec 31, 2018 level. As of the same date, cash and cash equivalents totaled $590.2 million, up from $511.1 million as of Dec 31, 2018.

Also, total stockholders’ equity was $1.02 billion as of Dec 31, 2019, up from $974.1 million recorded as of Dec 31, 2018.

Share Repurchase Update

LPL Financial repurchased $120 million worth of shares during the quarter.

Guidance

For 2020, management expects core G&A expenses of $915-$940 million.

Our Viewpoint

LPL Financial delivered a decent performance in the fourth quarter. The company’s recruiting efforts and solid advisor productivity will likely continue to aid revenues. Moreover, its inorganic growth efforts (including the acquisition of Allen & Company) look impressive and will likely aid the top line.

LPL Financial Holdings Inc. Price, Consensus and EPS Surprise
 

LPL Financial Holdings Inc. Price, Consensus and EPS Surprise

LPL Financial Holdings Inc. price-consensus-eps-surprise-chart | LPL Financial Holdings Inc. Quote

Currently, LPL Financial sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance & Earnings Release Date of Other Companies

BlackRock, Inc.’s BLK fourth-quarter 2019 adjusted earnings of $8.34 per share surpassed the Zacks Consensus Estimate of $7.67. Moreover, the figure was 37.2% higher than the year-ago quarter’s number.

Cohen & Steers’ CNS fourth-quarter 2019 adjusted earnings of 74 cents per share surpassed the Zacks Consensus Estimate of 67 cents. Also, the bottom line was 32.1% higher than the year-ago quarter figure.

Affiliated Managers Group, Inc. AMG is slated to announce results on Feb 3.

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