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Stifel Financial (SF) Q1 Earnings Beat on High Revenues

Stifel Financial Corp. SF reported first-quarter 2016 net income of 57 cents per share from continuing operations, beating the Zacks Consensus Estimate of 52 cents. However, the figure was below the prior-year figure of 65 cents.

Results benefited from an 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 from continuing operations of $27.1 million or 36 cents per share, compared with net income of $43.1 million or 56 cents in the prior-year quarter. The results included certain non-recurring items.

Performance in Detail

Net revenues were recorded at $620 million, up 10.5% year over year. The results were driven by higher global wealth management and institutional group revenues. Moreover, the revenue figure outpaced the Zacks Consensus Estimate of $618 million.

Global Wealth Management and Institutional Group segments’ net revenues increased 15.3% and 1.1%, respectively, on a year-over-year basis. Other revenues were a negative $1.1 million compared with a negative $7.0 million in the prior-year quarter.

Stifel Financial’s non-interest expenses were $576.1 million, up 17.3% from the year-ago quarter. The mounting non-interest operating expenses are a result of a rise in most categories of expenses including higher compensation and benefits expenses and elevated non-compensation operating expenses.

Credit Quality

Credit quality was a mixed bag in the quarter. Allowance, as a percentage of loans, decreased to 0.94% from 0.96% in the prior-year quarter. Moreover, non-performing assets as a percentage of total assets increased to 0.28% from 0.13% in the year-earlier quarter.

Capital Position

Stifel Financial’s capital position was strong during the quarter. As of Mar 31, 2016, total assets improved 51.6% to $14.2 billion from $9.4 billion as of Mar 31, 2015. Book value came in at $36.37 per share, up 4.4% from the prior-year quarter. Stockholders’ equity increased 2.3% year over year to $2.4 billion.

As of Mar 31, 2016, the company’s Tier 1 leverage capital ratio was 11.6% compared with 17.5% as of Mar 31, 2015. Further, Tier 1 risk-based capital ratio was 21.3% compared with 29.9% as of Mar 31, 2015.

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 low interest rate environment raise concern.

Stifel Financial currently carries a Zacks Rank #4 (Sell). Some better-ranked finance stocks include LPL Financial Holdings Inc. LPLA, Raymond James Financial, Inc. RJF and Enterprise Financial Services Corp. EFSC. All of these stocks sport a Zacks Rank #1 (Strong Buy).

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ENTERPRISE FINL (EFSC): Free Stock Analysis Report
 
STIFEL FINL (SF): Free Stock Analysis Report
 
RAYMOND JAS FIN (RJF): Free Stock Analysis Report
 
LPL FINL HLDGS (LPLA): Free Stock Analysis Report
 
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