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LPL Financial’s (LPLA - Free Report) third-quarter 2020 adjusted earnings of $1.44 per share surpassed the Zacks Consensus Estimate of $1.25. However, the figure reflected a decline of 16% from the prior-year quarter.
Results reflect rise in revenues driven by improvement in assets and cash balances. Further, the company’s balance sheet position remained strong. However, rise in expenses and lower new assets balance were headwinds.
After taking into consideration amortization of intangible assets, net income was $103.8 million or $1.29 per share, down from $131.7 million or $1.57 per share in the year-ago quarter.
Revenues & Expenses Rise
Total net revenues were $1.46 billion, up 3% year over year. The rise was driven by higher advisory fees and other revenues. Also, the figure beat the Zacks Consensus Estimate of $1.45 billion.
Total operating expenses increased 8% year over year to $1.3 billion. All expense components increased, except for professional services costs, promotional expenses and other costs.
At the end of the third quarter, LPL Financial’s total brokerage and advisory assets were $810.4 billion, up 13% year over year.
Total net new assets were $11.1 billion at the end of the quarter, down slightly from $11.9 billion recorded at the end of the prior-year quarter. Total client cash balances jumped 49% to $46.6 billion.
Balance Sheet Position Strong
As of Sep 30, 2020, the company had total assets of $6.09 billion, up 3% from the Jun 30, 2020 level. As of the same date, cash and cash equivalents totaled $800.8 million, down 5% sequentially.
Also, total stockholders’ equity was $1.21 billion as of Sep 30, 2020, up from $1.11 billion recorded at the end of the prior quarter.
Guidance
For 2020, management continues to expect core G&A expenses in the lower end of $915-$940 million.
Our View
LPL Financial’s recruiting efforts and solid advisor productivity are likely to aid advisory revenues amid the coronavirus outbreak-induced economic uncertainty. However, persistently mounting expenses are expected to hurt the bottom line to an extent in the near term.
LPL Financial Holdings Inc. Price, Consensus and EPS Surprise
Performance of Other Investment Brokerage Companies
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 were $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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LPL Financial (LPLA) Q3 Earnings Beat, Revenues Improve Y/Y
LPL Financial’s (LPLA - Free Report) third-quarter 2020 adjusted earnings of $1.44 per share surpassed the Zacks Consensus Estimate of $1.25. However, the figure reflected a decline of 16% from the prior-year quarter.
Results reflect rise in revenues driven by improvement in assets and cash balances. Further, the company’s balance sheet position remained strong. However, rise in expenses and lower new assets balance were headwinds.
After taking into consideration amortization of intangible assets, net income was $103.8 million or $1.29 per share, down from $131.7 million or $1.57 per share in the year-ago quarter.
Revenues & Expenses Rise
Total net revenues were $1.46 billion, up 3% year over year. The rise was driven by higher advisory fees and other revenues. Also, the figure beat the Zacks Consensus Estimate of $1.45 billion.
Total operating expenses increased 8% year over year to $1.3 billion. All expense components increased, except for professional services costs, promotional expenses and other costs.
At the end of the third quarter, LPL Financial’s total brokerage and advisory assets were $810.4 billion, up 13% year over year.
Total net new assets were $11.1 billion at the end of the quarter, down slightly from $11.9 billion recorded at the end of the prior-year quarter. Total client cash balances jumped 49% to $46.6 billion.
Balance Sheet Position Strong
As of Sep 30, 2020, the company had total assets of $6.09 billion, up 3% from the Jun 30, 2020 level. As of the same date, cash and cash equivalents totaled $800.8 million, down 5% sequentially.
Also, total stockholders’ equity was $1.21 billion as of Sep 30, 2020, up from $1.11 billion recorded at the end of the prior quarter.
Guidance
For 2020, management continues to expect core G&A expenses in the lower end of $915-$940 million.
Our View
LPL Financial’s recruiting efforts and solid advisor productivity are likely to aid advisory revenues amid the coronavirus outbreak-induced economic uncertainty. However, persistently mounting expenses are expected to hurt the bottom line to an extent in the near term.
LPL Financial Holdings Inc. Price, Consensus and EPS Surprise
LPL Financial Holdings Inc. price-consensus-eps-surprise-chart | LPL Financial Holdings Inc. Quote
Currently, LPL Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Investment Brokerage Companies
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 were $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.
Have You Seen Zacks’ 2020 Election Stock Report?
The upcoming election could be a massive buying opportunity for savvy investors. Trillions of dollars will shift into new market sectors after the election. The question is, which sectors will soar for each candidate? Zacks has put together a new special report to help readers like you target big profits.
The 2020 Election Stock Report reveals specific stocks you’ll want to own immediately after the results are announced – 6 if Trump wins, 6 if Biden wins. Past election reports have led investors to gains of +71%, +83%, even +185% in the following months. This year’s picks could be even more lucrative.
Check out Zacks’ 2020 Election Stock Report >>