Raymond James (RJF) Stock Down 2.6% on Q3 Earnings Miss
Shares of Raymond James RJF lost 2.6% in the after-hours trading following the release of its third-quarter fiscal 2023 (ended Jun 30) results. Adjusted earnings of $1.85 per share missed the Zacks Consensus Estimate of $2.10 by a considerable margin. The bottom line, however, was up 15% from the prior-year quarter.
A muted investment banking (IB) performance hurt the Capital Markets segment’s results. Also, RJF recorded bank loan provision for credit losses during the quarter on the deteriorating macroeconomic outlook. Further, expenses increased during the quarter.
Yet, higher interest rates and a rise in loan demand acted as tailwinds, which led to a substantial jump in net interest income (NII). The performance of the Private Client Group was robust. The acquisitions over the past years supported the company’s financials to some extent.
Net income available to common shareholders (GAAP basis) was $369 million, up 23% year over year.
Revenues & Costs Rise
Net revenues were $2.91 billion, up 7% year over year. The top line also beat the Zacks Consensus Estimate of $2.89 billion.
Segment-wise, in the reported quarter, RJ Bank registered a surge of 86% from the prior year in net revenues. Also, the Private Client Group recorded 11% growth in net revenues. Capital Markets’ top line declined 28%, while Asset Management’s net revenues fell 1%. Others recorded revenues of $15 million against negative revenues of $21 million in the prior-year quarter.
Non-interest expenses rose 5% to $2.42 billion. Our estimate for non-interest expenses was $2.34 billion. Also, RJF recorded a bank loan provision for credit losses of $54 million.
As of Jun 30, 2023, client assets under administration were $1.28 trillion, up 14% from the end of the prior-year quarter. Financial assets under management of $200.7 billion grew 10%.
Strong Balance Sheet & Capital Ratios
As of Jun 30, 2023, Raymond James has total assets of $77.63 billion, down 2% from the prior quarter. Total equity was stable at $9.9 billion.
Book value per share was $47.34, up from $43.60 as of Jun 30, 2022.
As of Jun 30, 2023, total capital ratio was 22% compared with 21.5% as of Jun 30, 2022. Tier 1 capital ratio was 20.6% compared with 20% as of June 2022-end.
Return on common equity (annualized basis) was 14.9% at the end of the reported quarter compared with 13.3% a year ago.
Share Repurchase Update
During the reported quarter, RJF repurchased 3.31 million shares for $300 million.
As of Jul 26, 2023, nearly $750 million remained under the buyback authorization.
Our Take
Raymond James’ global diversification efforts, strategic acquisitions and higher rates are expected to support top-line growth. However, elevated operating expenses, worsening operating backdrop and the volatile nature of capital markets businesses are near-term concerns.
Raymond James Financial, Inc. Price, Consensus and EPS Surprise
Raymond James Financial, Inc. price-consensus-eps-surprise-chart | Raymond James Financial, Inc. Quote
Currently, Raymond James carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance Other Investment Banks
Jefferies Financial Group Inc.’s JEF second-quarter fiscal 2023 (ended May 31) adjusted earnings per share of 29 cents lagged the Zacks Consensus Estimate of 33 cents. The bottom line also compared unfavorably with 46 cents earned in the prior-year quarter.
JEF’s results were adversely impacted by lower revenues on dismal asset management and advisory businesses. However, a decline in expenses and better-than-expected capital markets performance acted as tailwinds.
Moelis & Company MC incurred second-quarter 2023 adjusted loss per share of 4 cents, which is wider than the Zacks Consensus Estimate loss of 2 cents. The bottom line compares unfavorably with earnings of 57 cents reported in the prior-year quarter.
Results were adversely impacted by lower revenues due to soft industry-wide capital markets performance. Further, an increase in expenses acted as a headwind. Yet, the company’s solid liquidity position was a positive.
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