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Raymond James' Ratings Put on Review for Upgrade by Moody's

The Baa2 long-term issuer and Baa2 senior unsecured regular bond/debenture ratings of Raymond James Financial, Inc. RJF were recently placed on review by Moody's Investors Service, the rating services arm of Moody’s Corporation MCO, for a possible upgrade. The company’s outlook, which is currently positive, has also been placed under review.

The ratings will be upgraded if Moody’s concludes that the company’s rapid loan growth will not affect its financial performance. Moreover, the rating agency will also review the company’s risk management and compliance capabilities.

Raymond James’ strong and diversified business model, which has led to superior earnings performance so far, has probably led Moody’s to consider an upgrade.  

We note that the company recently announced a $150 million compliance matter settlement. In addition to this, its risk management and compliance functions in brokerage, bank and capital markets division, and its credit strength will also be considered in the review process.  

Looking at Raymond James’ price performance, the stock gained 24.3% in the last six months, outperforming the 16.4% gain for the Zacks categorized Financial - Investment Bank industry.



However, the rating agency also stated certain reasons that may lead to a possible downward revision. These include the company’s probable debt-funded acquisition without any deleveraging strategy, its failure to sustain in a complex regulatory environment, excessive capital deployment activities and failure to follow its conservative financial policy.

Per Moody’s, though the company’s expanding bank loan portfolio has led to profitability, it may expose the company to higher asset risk. Further, the company’s commercial real estate portfolio will be closely reviewed, as it may be negatively affected by any economic downturn.

We believe the upgrade, if Moody’s does so, will contribute to Raymond James’ credit worthiness.

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

Other Stocks to Consider

Other stocks worth considering in the same space include Evercore Partners Inc. EVR and BGC Partners, Inc. BGCP.

Evercore Partners witnessed an upward earnings estimate revision of 0.2% for the current year over the past 60 days. Its share price rose 48.21% in the last one year and it carries a Zacks Rank #2 (Buy). 

BGC Partners also witnessed an upward earnings estimate revision of 5.3% for the current year over the past 60 days. Its share price increased 15.90% in the last one year. This stock carries the same rank as Raymond James.

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Moody's Corporation (MCO): Free Stock Analysis Report
 
BGC Partners, Inc. (BGCP): Free Stock Analysis Report
 
Raymond James Financial, Inc. (RJF): Free Stock Analysis Report
 
Evercore Partners Inc (EVR): Free Stock Analysis Report
 
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