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Why Is Raymond James Financial, Inc. (RJF) Up 8.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Raymond James Financial, Inc. (RJF). Shares have added about 8.8% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Raymond James Financial, Inc. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Raymond James Q4 Earnings Lag Estimates on Higher Costs

Raymond James’ fourth-quarter fiscal 2023 (ended Sep 30) adjusted earnings of $2.13 per share missed the Zacks Consensus Estimate of $2.28. The bottom line, however, was up 2% from the prior-year quarter.

A muted investment banking (IB) performance hurt the Capital Markets segment’s results. Also, RJF recorded bank loan provisions 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 $432 million or $2.02 per share compared with $437 million or $1.98 per share in the prior-year quarter.

In fiscal 2023, adjusted earnings of $8.30 per share grew 11% year over year but lagged the consensus estimate of $8.48. Net income available to common shareholders (GAAP basis) was $1.73 billion or $7.97 per share, up from $1.51 billion or $6.98 per share in fiscal 2022.

Revenues & Costs Rise

Quarterly net revenues were $3.05 billion, up 8% year over year. The top line also beat the Zacks Consensus Estimate of $2.99 billion.

In fiscal 2023, net revenues increased 6% to $11.62 billion. The top line also beat the consensus estimate of $11.56 billion.

Segment-wise, in the reported quarter, RJ Bank registered a rise of 5% from the prior year in net revenues. Also, the Private Client Group recorded 14% growth in net revenues, Asset Management’s net revenues grew 9%, while Capital Markets’ top line declined 15%. Others recorded revenues of $25 million compared with revenues of $4 million in the prior-year quarter.

Non-interest expenses rose 11% to $2.47 billion. Our estimate for non-interest expenses was $2.40 billion. Also, RJF recorded a bank loan provision for credit losses of $36 million.

As of Sep 30, 2023, client assets under administration were $1.57 trillion, up 15% from the end of the prior-year quarter. Financial assets under management of $196.4 billion grew 13%. Our estimates for client assets under administration and financial assets under management were $1.25 trillion and $205.5 million, respectively.

Strong Balance Sheet & Capital Ratios

As of Sep 30, 2023, Raymond James has total assets of $78.36 billion, up 1% from the prior quarter. Total equity rose 3% to $10.14 billion.

Book value per share was $48.54, up from $43.41 as of Sep 30, 2022.

As of Sep 30, 2023, the total capital ratio was 22.8% compared with 20.4% as of Sep 30, 2022. Tier 1 capital ratio was 21.4% compared with 19.2% as of September 2022-end.

Return on common equity (annualized basis) was 17.3% at the end of the reported quarter compared with 18.7% a year ago.

Share Repurchase Update

During fiscal 2023, RJF repurchased 8.35 million shares for $788 million.

As of Oct 25, 2023, nearly $750 million remained under the buyback.

Outlook

The company expects combined net interest income and RJBDP fees from third-party banks to decline 5% sequentially in the fiscal first quarter of 2024.

In the fiscal first quarter, Private Client Group results are expected to be negatively impacted by the 2% sequential decline in assets in fee-based accounts.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Raymond James Financial, Inc. has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. It's no surprise Raymond James Financial, Inc. has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Raymond James Financial, Inc. belongs to the Zacks Financial - Investment Bank industry. Another stock from the same industry, Goldman Sachs (GS), has gained 14% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Goldman reported revenues of $11.82 billion in the last reported quarter, representing a year-over-year change of -1.3%. EPS of $5.47 for the same period compares with $8.25 a year ago.

Goldman is expected to post earnings of $5.31 per share for the current quarter, representing a year-over-year change of +59.9%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.7%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Goldman. Also, the stock has a VGM Score of F.

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