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Raymond James' (RJF) Q4 Earnings Beat, Revenues Rise Y/Y
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Raymond James’ (RJF - Free Report) fourth-quarter fiscal 2020 (ended Sep 30) adjusted earnings of $1.78 per share comfortably surpassed the Zacks Consensus Estimate of $1.36. However, on a year-over-year basis, the bottom line decreased 11%.
Results benefited from robust Capital Markets segment performance, which majorly supported revenue growth. Further, a rise in assets balance and strong balance sheet position were the tailwinds. However, higher operating expenses and drastic increase in loan loss provisions acted as undermining factors.
Net income (GAAP basis) was $209 million, down 21% from the prior-year quarter.
For fiscal 2020, adjusted earnings were $6.11 per share, down 17%. However, the figure beat the consensus estimate of $5.69. Net income (GAAP basis) declined 19% to $818 million.
Revenues & Costs Rise
Net revenues for the quarter were $2.08 billion, increasing 3% year over year. The rise was largely driven by higher total brokerage revenues and investment banking income. The top line also beat the Zacks Consensus Estimate of $1.95 billion.
For fiscal 2020, net revenues grew 3% to $7.99 billion. Moreover, the figure outpaced the Zacks Consensus Estimate of $7.86 billion.
Segment wise, for the reported quarter, RJ Bank registered a decline of 25% from the prior year in net revenues. Nonetheless, Private Client Group and Asset Management recorded 1% and 3% rise in revenues, respectively. Further, Capital Markets’ top line jumped 36% from the year-ago quarter. On the other hand, Others recorded negative net revenues of $10 million.
Non-interest expenses were up 17% year over year to $1.82 billion. The increase was mainly due to higher compensation, commissions and benefits, communications and information processing, and bank loan loss provision. Additionally, acquisition and disposition-related expenses, and reduction in workforce expenses were incurred during the quarter.
As of Sep 30, 2020, client assets under administration were $930.1 billion, up 11% from the end of the prior-year quarter. Financial assets under management were $153.1 billion, up 7%.
Strong Balance Sheet & Capital Ratios
As of Sep 30, 2020, Raymond James reported total assets of $47.5 billion, up 6% sequentially. Total equity increased 2% from the fiscal third quarter to $7.1 billion.
Book value per share was $52.08, up from $47.76 as of Sep 30, 2019.
As of Sep 30, 2020, total capital ratio was 25.4% compared with 25.8% as of the Sep 30, 2019 level. Tier 1 capital ratio was 24.2% compared with 24.8% as of September 2019-end.
Return on equity (annualized basis) was 11.9% at the end of the reported quarter compared with 16.2% in the comparable prior-year period.
Share Repurchase Update
In the reported quarter, Raymond James repurchased approximately 0.7 million shares for $50 million. Thus, for the fiscal 2020, the company repurchased approximately 3.35 million shares for $263 million, an average price of roughly $78.50 per share.
Under the previously announced share repurchase authorization, $487 million remained available as of Oct 27, 2020.
Our Viewpoint
Raymond James’ global diversification efforts and strength in investment banking business are expected to keep supporting top-line growth. However, continuously mounting operating expenses and lower interest rates are expected to hurt the company’s bottom line in the near term.
Raymond James Financial, Inc. Price, Consensus and EPS Surprise
Charles Schwab’s (SCHW - Free Report) third-quarter 2020 adjusted earnings of 51 cents per share beat the Zacks Consensus Estimate of 47 cents. However, the bottom line decreased 27% from the prior-year quarter.
Interactive Brokers Group’s (IBKR - Free Report) third-quarter 2020 adjusted earnings per share of 53 cents were in line with the Zacks Consensus Estimate. However, the figure reflects a decline of 7% from the prior-year quarter’s earnings.
Evercore’s (EVR - Free Report) third-quarter 2020 adjusted earnings per share of $1.11, handily beating the Zacks Consensus Estimate of 37 cents on solid underwriting fees. However, results were down 12% from the prior-year quarter’s $1.26 per share.
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Raymond James' (RJF) Q4 Earnings Beat, Revenues Rise Y/Y
Raymond James’ (RJF - Free Report) fourth-quarter fiscal 2020 (ended Sep 30) adjusted earnings of $1.78 per share comfortably surpassed the Zacks Consensus Estimate of $1.36. However, on a year-over-year basis, the bottom line decreased 11%.
Results benefited from robust Capital Markets segment performance, which majorly supported revenue growth. Further, a rise in assets balance and strong balance sheet position were the tailwinds. However, higher operating expenses and drastic increase in loan loss provisions acted as undermining factors.
Net income (GAAP basis) was $209 million, down 21% from the prior-year quarter.
For fiscal 2020, adjusted earnings were $6.11 per share, down 17%. However, the figure beat the consensus estimate of $5.69. Net income (GAAP basis) declined 19% to $818 million.
Revenues & Costs Rise
Net revenues for the quarter were $2.08 billion, increasing 3% year over year. The rise was largely driven by higher total brokerage revenues and investment banking income. The top line also beat the Zacks Consensus Estimate of $1.95 billion.
For fiscal 2020, net revenues grew 3% to $7.99 billion. Moreover, the figure outpaced the Zacks Consensus Estimate of $7.86 billion.
Segment wise, for the reported quarter, RJ Bank registered a decline of 25% from the prior year in net revenues. Nonetheless, Private Client Group and Asset Management recorded 1% and 3% rise in revenues, respectively. Further, Capital Markets’ top line jumped 36% from the year-ago quarter. On the other hand, Others recorded negative net revenues of $10 million.
Non-interest expenses were up 17% year over year to $1.82 billion. The increase was mainly due to higher compensation, commissions and benefits, communications and information processing, and bank loan loss provision. Additionally, acquisition and disposition-related expenses, and reduction in workforce expenses were incurred during the quarter.
As of Sep 30, 2020, client assets under administration were $930.1 billion, up 11% from the end of the prior-year quarter. Financial assets under management were $153.1 billion, up 7%.
Strong Balance Sheet & Capital Ratios
As of Sep 30, 2020, Raymond James reported total assets of $47.5 billion, up 6% sequentially. Total equity increased 2% from the fiscal third quarter to $7.1 billion.
Book value per share was $52.08, up from $47.76 as of Sep 30, 2019.
As of Sep 30, 2020, total capital ratio was 25.4% compared with 25.8% as of the Sep 30, 2019 level. Tier 1 capital ratio was 24.2% compared with 24.8% as of September 2019-end.
Return on equity (annualized basis) was 11.9% at the end of the reported quarter compared with 16.2% in the comparable prior-year period.
Share Repurchase Update
In the reported quarter, Raymond James repurchased approximately 0.7 million shares for $50 million. Thus, for the fiscal 2020, the company repurchased approximately 3.35 million shares for $263 million, an average price of roughly $78.50 per share.
Under the previously announced share repurchase authorization, $487 million remained available as of Oct 27, 2020.
Our Viewpoint
Raymond James’ global diversification efforts and strength in investment banking business are expected to keep supporting top-line growth. However, continuously mounting operating expenses and lower interest rates are expected to hurt the company’s bottom line in the near term.
Raymond James Financial, Inc. Price, Consensus and EPS Surprise
Raymond James Financial, Inc. price-consensus-eps-surprise-chart | Raymond James Financial, Inc. Quote
Currently, the company 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
Charles Schwab’s (SCHW - Free Report) third-quarter 2020 adjusted earnings of 51 cents per share beat the Zacks Consensus Estimate of 47 cents. However, the bottom line decreased 27% from the prior-year quarter.
Interactive Brokers Group’s (IBKR - Free Report) third-quarter 2020 adjusted earnings per share of 53 cents were in line with the Zacks Consensus Estimate. However, the figure reflects a decline of 7% from the prior-year quarter’s earnings.
Evercore’s (EVR - Free Report) third-quarter 2020 adjusted earnings per share of $1.11, handily beating the Zacks Consensus Estimate of 37 cents on solid underwriting fees. However, results were down 12% from the prior-year quarter’s $1.26 per share.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>