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Raymond James (RJF) Beats Q3 Earnings on Improved Revenues

Raymond James Financial Inc. RJF announced third-quarter fiscal 2017 (ended Jun 30) adjusted earnings per share of $1.26, which surpassed the Zacks Consensus Estimate of $1.24. Also, on a year-over-year basis, the bottom line surged 31%.

Results were primarily driven by a rise in net revenue, reflecting improved investment banking. Also, growth in assets acted as a tailwind. However, higher expenses were on the downside.
 
After taking into consideration several non-recurring items, net income totaled $183.4 million, up 46% from the year-ago quarter.

Revenues Improve, Costs Surge

Net revenue amounted to $1,624.5 million, improving 20% year over year. The rise was attributable to an increase in all the revenue components. However, a rise in interest expenses and lower net trading profit hurt revenues marginally. Further, the reported figure beat the Zacks Consensus Estimate of $1,616.0 million.

Segment wise, in the reported quarter, RJ Bank recorded a net revenue increase of 19%. Further, Capital Markets witnessed net revenue growth of 3% while Asset Management and Private Client Group depicted top-line improvement of 24% and 25%, respectively. However, Others reported negative revenues.

Non-interest expenses jumped 17% year over year to $1,347.6 million. The rise was largely due to increase in all cost components, except acquisition-related costs that plunged 75%.

As of Jun 30, 2017, client assets under administration increased 24% on a year-over-year basis to $664.4 billion while financial assets under management rose 27% to $91 billion.

Strong Balance Sheet & Ratios

As of Jun 30, 2017, Raymond James reported total assets of $33.4 billion, up 2% sequentially. Further, shareholders’ equity rose 4% on a sequential basis to $5.21 billion.

Book value per share was $37.46, up from $33.62 as of Jun 30, 2016.

As of Jun 30, 2017, total capital ratio came in at 23.3%, up from 22.3% as of Jun 30,, 2016. Also, Tier 1 capital ratio was 22.3% compared with 21.3% in the year-ago period.

Also, adjusted return on equity came in at 14.0% at the end of the reported quarter, up from 11.8% 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 second-quarter 2017 earnings were in line the Zacks Consensus Estimate. Revenue growth, lower level of fee waivers and no provisions were among the positives. However, higher expenses and a decline in trading revenues remained the headwinds.

Interactive Brokers Group, Inc. IBKR reported second-quarter 2017 adjusted earnings of 32 cents per share, which lagged the Zacks Consensus Estimate by a penny. Higher expenses and lower trading volume hurt the results. On the other hand, an increase in revenues, improved Electronic Brokerage segment performance and a rise in DARTs acted as tailwinds.

TD Ameritrade Holding Corporation AMTD delivered a positive surprise of 7.3% in third-quarter fiscal 2017 (ending Jun 30). The company reported earnings of 44 cents per share, beating the Zacks Consensus Estimate of 41 cents. Results reflected growth in revenues and net interest margin expansion. However, the positives were partially offset by elevated expenses.

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