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Stifel Financial's (SF) Shares Rally on Q1 Earnings Beat

Zacks Equity Research

Following a positive earnings surprise of 7.3% in first-quarter 2019, shares of Stifel Financial Corp. SF climbed 1.05%. The company reported net income of $1.32 per share available to common shareholders, beating the Zacks Consensus Estimate of $1.23. Further, the figure comes in higher than the prior-year tally of $1.15.

Results reflected improved top line and a strong capital position. However, higher operating expenses were a major drag.

On a GAAP basis, Stifel Financial reported net income available to common shareholders of $96.9 million or $1.22 per share compared with net income of $86.4 million or $1.06 in the year-ago quarter. The results included certain non-recurring items.

Revenues Improve, Expenses Flare Up

Net revenues came in at $770.4 million, up 2.6% year over year. The upside was mainly driven by higher other income and interest revenues, partly offset by lower brokerage, investment banking along with asset management and service fees revenues. Further, the revenue figure outpaced the Zacks Consensus Estimate of $741.5 million.

Global Wealth Management segment’s net revenues increased 5.2% year over year, while Institutional Group’s net revenues slipped 3.3%. Other revenues were a negative $1.5 million compared with a negative $5.3 million in the prior-year quarter.

Stifel Financial’s non-interest expenses were $632.6 million, up 0.3% from the year-ago quarter. The mounting non-interest operating expenses mainly are a result of a rise in commissions and floor brokerage, and elevated provision for loan losses. Lower other operating expenses were a tailwind.

Credit Quality: A Mixed Bag

Credit quality was a mixed bag in the reported quarter. Allowance, as a percentage of loans, inched up to 1% from 0.97% in the prior-year quarter. Yet, non-performing assets as a percentage of total assets, edged down to 0.13% from 0.14% in the year-earlier quarter.

Strong Capital Position

Stifel Financial’s capital position was strong during the first quarter. As of Mar 31, 2019, total assets improved 11.3% to $16.8 billion from $15.2 billion as of Mar 31, 2018. Book value came in at $43.18 per share, up 12.2% from the prior-year quarter. Stockholders’ equity increased 9.1% year over year to $1.2 billion.

As of Mar 31, 2019, the company’s Tier 1 leverage capital ratio was 9.8% compared with 9.6% as of Mar 31, 2018. Further, Tier 1 risk-based capital ratio was 18.5% compared with 18.7% as of Mar 31, 2018.

Our Viewpoint

Stifel Financial, with its solid business model and strategic acquisitions, is well poised for growth. While the company’s sound capital position and robust top-line performance will boost results over the long haul, sluggish economic recovery, regulatory issues and escalating expenses raise concerns.

Stifel Financial Corporation Price, Consensus and EPS Surprise

Stifel Financial Corporation Price, Consensus and EPS Surprise | Stifel Financial Corporation Quote

Currently, Stifel Financial carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Investment Brokerage Firms

E*TRADE Financial ETFC delivered a positive earnings surprise of 16% in the January-March quarter. Earnings of $1.09 per share comfortably surpassed the Zacks Consensus Estimate of 94 cents. Moreover, the results compared favorably with 88 cents recorded in the prior-year quarter.

Charles Schwab’s SCHW first-quarter 2019 earnings of 69 cents per share surpassed the Zacks Consensus Estimate of 66 cents. Also, earnings increased 25% from the prior-year quarter. Revenue growth (driven by a rise in interest income) and an increase in total client assets aided the results. However, higher expenses and lower trading revenues acted as headwinds.

TD Ameritrade Holding Corporation AMTD reported second-quarter fiscal 2019 (ending Mar 31) earnings of 93 cents per share, in line with the Zacks Consensus Estimate. The figure jumped 27% from the prior-year quarter.

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