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Analyst Blog

On Jul 2, 2014, we issued an updated research report on Raymond James Financial, Inc. (RJF - Analyst Report). Most business segments of this St. Petersburg, FL-based investment brokerage firm are performing relatively well, with private client group (PCG) being the best performer. However, rising operating expenses continue to put huge pressure on the company’s financials.

Revenue growth in the PCG segment is mainly attributable to a solid increase in the fee-based income. PCG segment revenues witnessed a 10.4% rise in the first six months of fiscal 2014 (Raymond James’ fiscal year ends in September), as against the prior-year comparable period.

Further, the company has recently resorted to a strategy of inorganic expansion. Given its strong liquidity position, a healthy balance sheet and stable long-term debt outlook, Raymond James expects to witness considerable inorganic growth.

Nevertheless, escalating operating expenses remain a serious concern for the company. Persistent increases in compensation is a major contributor to the mounting expenses. Going forward, competitive environment and regulatory changes are likely to push the expense level even further.

Over the past 60 days, the Zacks Consensus Estimate for 2014 inched down 1.2% to $3.17 per share, and it declined 1.6% to $3.62 per share for 2015.

Raymond James currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked finance stocks include Central Pacific Financial Corp. (CPF - Snapshot Report), Kohlberg Kravis Roberts & Co. (KKR - Snapshot Report) and The Royal Bank of Scotland Group plc (RBS - Snapshot Report). All these stocks sport a Zacks Rank #1 (Strong Buy).

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