It has been about a month since the last earnings report for Raymond James Financial, Inc. (RJF - Free Report) . Shares have lost about 8.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Raymond James Beats Q3 Earnings on Improved Revenues
Raymond James announced third-quarter fiscal 2017 (ended Jun 30) adjusted earnings per share of $1.26, which surpassed the Zacks Consensus Estimate of $1.24. Also, on a year-over-year basis, the bottom line surged 31%.
Results were primarily driven by a rise in net revenue, reflecting improved investment banking. Also, growth in assets acted as a tailwind. However, higher expenses were on the downside.
After taking into consideration several non-recurring items, net income totaled $183.4 million, up 46% from the year-ago quarter.
Revenues Improve, Costs Surge
Net revenue amounted to $1,624.5 million, improving 20% year over year. The rise was attributable to an increase in all the revenue components. However, a rise in interest expenses and lower net trading profit hurt revenues marginally. Further, the reported figure beat the Zacks Consensus Estimate of $1,616.0 million.
Segment wise, in the reported quarter, RJ Bank recorded a net revenue increase of 19%. Further, Capital Markets witnessed net revenue growth of 3% while Asset Management and Private Client Group depicted top-line improvement of 24% and 25%, respectively. However, Others reported negative revenues.
Non-interest expenses jumped 17% year over year to $1,347.6 million. The rise was largely due to increase in all cost components, except acquisition-related costs that plunged 75%.
As of Jun 30, 2017, client assets under administration increased 24% on a year-over-year basis to $664.4 billion while financial assets under management rose 27% to $91 billion.
Strong Balance Sheet & Ratios
As of Jun 30, 2017, Raymond James reported total assets of $33.4 billion, up 2% sequentially. Further, shareholders’ equity rose 4% on a sequential basis to $5.21 billion.
Book value per share was $37.46, up from $33.62 as of Jun 30, 2016.
As of Jun 30, 2017, total capital ratio came in at 23.3%, up from 22.3% as of Jun 30,, 2016. Also, Tier 1 capital ratio was 22.3% compared with 21.3% in the year-ago period.
Also, adjusted return on equity came in at 14.0% at the end of the reported quarter, up from 11.8% a year ago.
Fiscal 2017 Outlook
Management projects net interest margin for the RJ Bank to be in the range of 3.10-3.20%.
The company expects pre-tax margin to reach over 17%, with support from PCG segment (12%), Capital Markets (15%) and Asset Management (30%).
Moreover, compensation ratio is anticipated to be less than 67%.
Raymond James targets to achieve ROE in the range of 14-15%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
At this time, Raymond James' stock has an average Growth Score of B, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.