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Raymond James (RJF) Q4 Earnings Beat, Revenues Improve

Raymond James Financial Inc. RJF announced fourth-quarter fiscal (ended Sep 30) and fiscal 2017 results. Adjusted earnings per share for the quarter came in at $1.47, which surpassed the Zacks Consensus Estimate of $1.34. Also, on a year-over-year basis, the bottom line surged 10%.

Results were primarily driven by an increase in net revenues, reflecting improved investment banking. Also, growth in assets acted as a tailwind. However, higher expenses were on the downside.
 
Taking into consideration several non-recurring items, net income for the quarter totaled $193.5 million or $1.31 per share, reflecting an increase from $171.7 million or $1.19 per share reported in the year-ago quarter.

For fiscal 2017, adjusted earnings per share of $5.23 increased 33% year over year. Also, it surpassed the Zacks Consensus Estimate of $5.02 per share. Taking into consideration several non-recurring items, net income totalled $636.3 million or $4.33 per share, increasing from $529.4 million or $3.65 per share registered in the prior year.

Revenues Improve, Costs Surge

Net revenues for the quarter amounted to $1.69 billion, improving 16% year over year. The rise was attributable to an increase in almost all the revenue components. However, a rise in interest expenses and lower net trading profit and other revenues hurt revenues marginally. Further, the reported figure beat the Zacks Consensus Estimate of $1.67billion.

For fiscal 2017, net revenues totaled $6.37 billion, increasing 18% year over year. Also, the figure surpassed the Zacks Consensus Estimate of $6.35 billion.

Segment wise, in the reported quarter, RJ Bank registered an increase of 22% in net revenues. Further, Asset Management and Private Client Group depicted top-line improvement of 24% and 21%, respectively. However, Capital Markets witnessed a decline of 7% in net revenues, while Others reported negative revenues.

Non-interest expenses increased 16% year over year to $1.41 billion. The rise was largely due to increase in all cost components, except acquisition-related costs that declined 95% and lower other expenses.

As of Sep 30, 2017, client assets under administration increased 15% on a year-over-year basis to $692.9 billion, while financial assets under management rose 25% to $96.4 billion.

Strong Balance Sheet, Capital Ratios Improve

As of Sep 30, 2017, Raymond James reported total assets of $34.9 billion, increasing 4.5% sequentially. Further, total equity rose 3.7% on a sequential basis to $5.6 billion.

Book value per share was $38.74, up from $34.73 as of Sep 30, 2016.

As of Sep 30, 2017, total capital ratio came in at 23.9%, increasing from 21.6% as of Sep 30, 2016. Also, Tier 1 capital ratio was 23.0% compared with 20.6% in the year-ago period.

However, adjusted return on equity came in at 15.8% at the end of the reported quarter, down from 16.0% a year ago.

Our Take

Raymond James remains well positioned to grow via acquisitions, supported by a strong liquidity position. Further, loan growth coupled with improving economic environment will boost its top-line growth in the coming quarters.

Raymond James Financial, Inc. Price, Consensus and EPS Surprise
 

Raymond James Financial, Inc. Price, Consensus and EPS Surprise | Raymond James Financial, Inc. Quote

Currently, Raymond James 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

The Charles Schwab Corp.’s SCHW third-quarter 2017 earnings of 42 cents per share were a penny above the Zacks Consensus Estimate. Revenue growth (driven by a rise in interest income), lower level of fee waivers and no provisions were among the positives. Further, there was an impressive rise in total client assets and new brokerage accounts. However, higher expenses and a decrease in trading revenues remained headwinds.

Interactive Brokers Group, Inc. IBKR reported third-quarter 2017 adjusted earnings of 43 cents per share, which surpassed the Zacks Consensus Estimate of 37 cents. Results benefited from improvement in revenues, lower operating expenses and a rise in DARTs, while lower trading volume was the undermining factor.

TD Ameritrade Holding Corporation AMTD delivered a positive surprise of 6.5% in fourth-quarter fiscal 2017 (ending Sep 30). The company reported earnings of 49 cents per share, beating the Zacks Consensus Estimate of 46 cents. Results reflect growth in revenues. Net interest margin (NIM) expansion was another positive. However, the positives were partially offset by elevated expenses.

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