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Raymond James' (RJF) Q1 Earnings Top; Expenses Increase

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Raymond James Financial Inc. (RJF - Free Report) announced first-quarter fiscal 2017 (ended Dec 31) adjusted earnings per share of $1.07, which comfortably surpassed the Zacks Consensus Estimate of $1.00. Also, on a year-over-year basis, the bottom line surged 47%.

Better-than-expected results were primarily driven by an improvement in net revenues. Also, growth in assets acted as a tailwind. However, higher expense levels owing to acquisition related charges were the undermining factor.

After taking into consideration acquisition related charges, net income totaled $146.6 million, up 38% from the year-ago quarter.

Revenues Improve, Costs Escalate

Net revenues amounted to $1.49 billion, improving 17% year over year. The rise was attributable to an increase in all the revenue components except net trading profits. Also, a rise in interest expenses hurt revenues marginally. Further, the reported figure beat the Zacks Consensus Estimate of $1.47 billion.

Segment-wise, for the reported quarter, RJ Bank recorded a net revenue increase of 27%. Further, Capital Markets witnessed net revenue growth of 3%, while Asset Management and Private Client Group depicted top-line improvement of 14% and 19%, respectively. However, Others reported a 35% decline in the top line.

Non-interest expenses jumped 16% year over year to $1.29 billion. The rise was largely due to significant surge in acquisition-related expenses.

As of Dec 31, 2016, client assets under administration increased 23% on a year-over-year basis to $616.9 billion, while financial assets under management rose 17% year over year to $79.7 billion.

Strong Balance Sheet & Ratios

As of Dec 31, 2016, Raymond James reported total assets of $31.7 billion, up nearly 1% sequentially. Further, shareholders’ equity rose 3% on a sequential basis to $5.08 billion.

Book value per share was $35.55, up from $32.38 as of Dec 31, 2015.

As of Dec 31, 2016, total capital ratio came in at 22.1%, down from 23.7% as of Dec 31, 2015. Also, Tier 1 capital ratio was 21.1% compared with 22.6% in the year-ago period.

However, return on equity (on an annualized basis) came in at 11.3% as of Dec 31, 2016, up from 9.3% a year ago.

Our Take

Raymond James remains well positioned to grow via acquisitions, supported by a strong liquidity position. Notably, the acquisitions of U.S. Private Client Services unit of Deutsche Asset & Wealth Management and 3Macs are expected to continue supporting the company’s performance. 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 holds 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 - Free Report) fourth-quarter 2016 adjusted earnings of 36 cents per share were in line the Zacks Consensus Estimate. Revenue growth, primarily driven by increase in equity market volatility, lower level of fee waivers and no provisions were among the positives. However, higher expenses remained a headwind.

Interactive Brokers Group, Inc. (IBKR - Free Report) reported fourth-quarter 2016 adjusted earnings of 7 cents per share, which significantly lagged the Zacks Consensus Estimate of 32 cents. Significant decrease in revenues, higher expenses as well as disappointing performance of the Market Making and Corporate segments led to the lower-than-expected quarterly results. However, on the upside, the company recorded improvement in interest income and a rise in DARTs.

TD Ameritrade Holding Corporation (AMTD - Free Report) reported its first-quarter fiscal 2017 (ending Dec 31) earnings of 41 cents per share, up 5% from the prior-year quarter. However, results were in line with the Zacks Consensus Estimate. The quarter reflected higher revenues and elevated expenses. Persistent decline in net interest margin added to the downside.

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