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LPL Financial’s (LPLA - Free Report) fourth-quarter 2020 adjusted earnings of $1.53 per share surpassed the Zacks Consensus Estimate of $1.36. However, the figure reflects a decline of 9% from the prior-year quarter.
Results for the quarter benefited from an improvement in revenues, partly offset by higher expenses. Further, the company’s balance sheet position remained strong.
After taking into consideration the amortization of intangible assets, net income was $111.5 million or $1.39 per share, down from $126.7 million or $1.53 per share in the year-ago quarter.
For 2020, adjusted earnings of $6.46 per share outpaced the Zacks Consensus Estimate of $6.30. Net income (GAAP basis) was $472.6 million or $5.86 per share, down from $559.9 million or $6.62 per share recorded in 2019.
Revenues Improve, Expenses Rise
Total quarterly net revenues were $1.58 billion, up 9% year over year. An increase in all components of revenues except for asset-based revenues and net interest income drove the rise. The figure beat the Zacks Consensus Estimate of $1.53 billion.
For the year, net revenues of $5.87 billion surpassed the Zacks Consensus Estimate of $5.76 billion. The top line increased 4% year over year.
During the quarter, total operating expenses increased 13% year over year to $1.41 billion. All expense components increased, except for professional services costs, promotional expenses and other costs.
At the end of the reported quarter, LPL Financial’s total brokerage and advisory assets were $903.1 billion, up 18% year over year.
Total net new assets were $21.8 billion at the end of the quarter, up from $12.5 billion of new assets recorded at the end of the prior-year quarter. Total client cash balances jumped 45% to $48.9 billion.
Balance Sheet Position Strong
As of Dec 31, 2020, the company had total assets of $6.52 billion, up 7% from the Sep 30, 2020-level. As of the same date, cash and cash equivalents totaled $808.6 million, up 1% sequentially.
Total stockholders’ equity was $1.31 billion as of Dec 31, 2020, up from $1.21 billion recorded at the end of the prior quarter.
Guidance
For 2021, management expects core G&A expenses to be in the range of $975 million and $1 billion (prior to expenses from the acquisition of Waddell & Reed).
Our View
LPL Financial’s recruiting efforts and solid advisor productivity are likely to continue to aid advisory revenues. Notably, the deal to acquire the wealth management business of Waddell & Reed Financial is expected to be accretive to run-rate earnings “prior to intangibles following asset transfer.”
However, persistently mounting expenses are expected to hurt the company’s bottom line to an extent in the near term.
LPL Financial Holdings Inc. Price, Consensus and EPS Surprise
Charles Schwab’s (SCHW - Free Report) fourth-quarter 2020 adjusted earnings of 74 cents per share beat the Zacks Consensus Estimate of 70 cents. Also, the bottom line grew 17% from the prior-year quarter, as the company reported the first full-quarter results after closing the TD Ameritrade deal in October 2020.
Interactive Brokers Group’s (IBKR - Free Report) fourth-quarter 2020 adjusted earnings per share of 69 cents outpaced the Zacks Consensus Estimate of 59 cents. Also, the bottom line reflects growth of 19% on a year-over-year basis.
Raymond James’ (RJF - Free Report) first-quarter fiscal 2021 (ended Dec 31) adjusted earnings of $2.24 per share comfortably surpassed the Zacks Consensus Estimate of $1.71. Also, on a year-over-year basis, the bottom line increased 19%.
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LPL Financial (LPLA) Q4 Earnings Beat, Revenues Improve Y/Y
LPL Financial’s (LPLA - Free Report) fourth-quarter 2020 adjusted earnings of $1.53 per share surpassed the Zacks Consensus Estimate of $1.36. However, the figure reflects a decline of 9% from the prior-year quarter.
Results for the quarter benefited from an improvement in revenues, partly offset by higher expenses. Further, the company’s balance sheet position remained strong.
After taking into consideration the amortization of intangible assets, net income was $111.5 million or $1.39 per share, down from $126.7 million or $1.53 per share in the year-ago quarter.
For 2020, adjusted earnings of $6.46 per share outpaced the Zacks Consensus Estimate of $6.30. Net income (GAAP basis) was $472.6 million or $5.86 per share, down from $559.9 million or $6.62 per share recorded in 2019.
Revenues Improve, Expenses Rise
Total quarterly net revenues were $1.58 billion, up 9% year over year. An increase in all components of revenues except for asset-based revenues and net interest income drove the rise. The figure beat the Zacks Consensus Estimate of $1.53 billion.
For the year, net revenues of $5.87 billion surpassed the Zacks Consensus Estimate of $5.76 billion. The top line increased 4% year over year.
During the quarter, total operating expenses increased 13% year over year to $1.41 billion. All expense components increased, except for professional services costs, promotional expenses and other costs.
At the end of the reported quarter, LPL Financial’s total brokerage and advisory assets were $903.1 billion, up 18% year over year.
Total net new assets were $21.8 billion at the end of the quarter, up from $12.5 billion of new assets recorded at the end of the prior-year quarter. Total client cash balances jumped 45% to $48.9 billion.
Balance Sheet Position Strong
As of Dec 31, 2020, the company had total assets of $6.52 billion, up 7% from the Sep 30, 2020-level. As of the same date, cash and cash equivalents totaled $808.6 million, up 1% sequentially.
Total stockholders’ equity was $1.31 billion as of Dec 31, 2020, up from $1.21 billion recorded at the end of the prior quarter.
Guidance
For 2021, management expects core G&A expenses to be in the range of $975 million and $1 billion (prior to expenses from the acquisition of Waddell & Reed).
Our View
LPL Financial’s recruiting efforts and solid advisor productivity are likely to continue to aid advisory revenues. Notably, the deal to acquire the wealth management business of Waddell & Reed Financial is expected to be accretive to run-rate earnings “prior to intangibles following asset transfer.”
However, persistently mounting expenses are expected to hurt the company’s 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 Companies
Charles Schwab’s (SCHW - Free Report) fourth-quarter 2020 adjusted earnings of 74 cents per share beat the Zacks Consensus Estimate of 70 cents. Also, the bottom line grew 17% from the prior-year quarter, as the company reported the first full-quarter results after closing the TD Ameritrade deal in October 2020.
Interactive Brokers Group’s (IBKR - Free Report) fourth-quarter 2020 adjusted earnings per share of 69 cents outpaced the Zacks Consensus Estimate of 59 cents. Also, the bottom line reflects growth of 19% on a year-over-year basis.
Raymond James’ (RJF - Free Report) first-quarter fiscal 2021 (ended Dec 31) adjusted earnings of $2.24 per share comfortably surpassed the Zacks Consensus Estimate of $1.71. Also, on a year-over-year basis, the bottom line increased 19%.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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