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Raymond James (RJF) Q2 Earnings Beat, Revenues Increase Y/Y
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Raymond James’ (RJF - Free Report) second-quarter fiscal 2020 (ended Mar 31) earnings of $1.20 per share surpassed the Zacks Consensus Estimate of 89 cents. However, on a year-over-year basis, the bottom line decreased 33.7%.
Results benefited from an increase in revenues. Moreover, the company’s balance sheet position was strong in the quarter. However, higher operating expenses acted as an undermining factor.
Net income was $169 million, down 35.2% from the prior-year quarter.
Revenues Improve, Costs Rise
Net revenues amounted to $2.1 billion, growing 11.2% year over year. The rise was largely driven by an increase in asset management and related administrative fees, and brokerage revenues.
Segment wise, in the reported quarter, RJ Bank registered a decline of 1% in net revenues. Capital Markets witnessed a rise of 4.7% in the top line, and Private Client Group recorded 17.6% growth. Further, Asset Management witnessed a 13.6% jump. However, Others recorded negative net revenues of $44 million.
Non-interest expenses were up 21% year over year to $1.8 billion. The increase was due to a rise in almost all cost components, except for other expenses.
As of Mar 31, 2020, client assets under administration were $773.9 billion, down 2.8% from the prior-year quarter end. Financial assets under management were $128.2 billion, down 7.4% from the prior-year quarter.
Strong Balance Sheet & Capital Ratios
As of Mar 31, 2020, Raymond James reported total assets of $49.8 billion, up 24% sequentially. Total equity declined 1% from the prior quarter to $6.8 billion.
Book value per share was $49.69, up from $45.34 as of Mar 31, 2019.
As of Mar 31, 2020, total capital ratio was 25.3%, unchanged from the Mar 31, 2019 level. Tier 1 capital ratio was 24.1% compared with 24.3% as of March 2019 end.
Return on equity (annualized basis) was 9.9% at the end of the reported quarter compared with 16.7% in the prior-year quarter.
Share Repurchase Update
During the fiscal second quarter, Raymond James repurchased 2.5 million shares for $202 million. However, in mid-March, the company announced that it currently suspended all share buybacks in response to the COVID-19 outbreak.
Our Take
Continuously mounting operating expenses due to higher compensation costs (as witnessed in the reported quarter as well) are expected to hurt Raymond James’ bottom line in the near term. Moreover, the company’s high dependence on capital markets to generate investment banking revenues is a major concern. Nevertheless, its global diversification efforts are expected to keep driving top-line growth.
Raymond James Financial, Inc. Price, Consensus and EPS Surprise
Charles Schwab’s (SCHW - Free Report) first-quarter 2020 adjusted earnings of 62 cents per share lagged the Zacks Consensus Estimate of 64 cents. Also, the bottom line decreased 10% from the prior-year quarter.
Interactive Brokers Group’s (IBKR - Free Report) first-quarter 2020 adjusted earnings per share of 69 cents surpassed the Zacks Consensus Estimate of 67 cents. The figure was 25.5% higher than the prior-year earnings.
Moelis & Company’s (MC - Free Report) first-quarter 2020 adjusted earnings of 45 cents per share surpassed the Zacks Consensus Estimate of 37 cents. Moreover, the figure was 66.7% higher than the year-ago quarter’s reported number.
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Raymond James (RJF) Q2 Earnings Beat, Revenues Increase Y/Y
Raymond James’ (RJF - Free Report) second-quarter fiscal 2020 (ended Mar 31) earnings of $1.20 per share surpassed the Zacks Consensus Estimate of 89 cents. However, on a year-over-year basis, the bottom line decreased 33.7%.
Results benefited from an increase in revenues. Moreover, the company’s balance sheet position was strong in the quarter. However, higher operating expenses acted as an undermining factor.
Net income was $169 million, down 35.2% from the prior-year quarter.
Revenues Improve, Costs Rise
Net revenues amounted to $2.1 billion, growing 11.2% year over year. The rise was largely driven by an increase in asset management and related administrative fees, and brokerage revenues.
Segment wise, in the reported quarter, RJ Bank registered a decline of 1% in net revenues. Capital Markets witnessed a rise of 4.7% in the top line, and Private Client Group recorded 17.6% growth. Further, Asset Management witnessed a 13.6% jump. However, Others recorded negative net revenues of $44 million.
Non-interest expenses were up 21% year over year to $1.8 billion. The increase was due to a rise in almost all cost components, except for other expenses.
As of Mar 31, 2020, client assets under administration were $773.9 billion, down 2.8% from the prior-year quarter end. Financial assets under management were $128.2 billion, down 7.4% from the prior-year quarter.
Strong Balance Sheet & Capital Ratios
As of Mar 31, 2020, Raymond James reported total assets of $49.8 billion, up 24% sequentially. Total equity declined 1% from the prior quarter to $6.8 billion.
Book value per share was $49.69, up from $45.34 as of Mar 31, 2019.
As of Mar 31, 2020, total capital ratio was 25.3%, unchanged from the Mar 31, 2019 level. Tier 1 capital ratio was 24.1% compared with 24.3% as of March 2019 end.
Return on equity (annualized basis) was 9.9% at the end of the reported quarter compared with 16.7% in the prior-year quarter.
Share Repurchase Update
During the fiscal second quarter, Raymond James repurchased 2.5 million shares for $202 million. However, in mid-March, the company announced that it currently suspended all share buybacks in response to the COVID-19 outbreak.
Our Take
Continuously mounting operating expenses due to higher compensation costs (as witnessed in the reported quarter as well) are expected to hurt Raymond James’ bottom line in the near term. Moreover, the company’s high dependence on capital markets to generate investment banking revenues is a major concern. Nevertheless, its global diversification efforts are expected to keep driving top-line growth.
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 has a Zacks Rank #4 (Sell).
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) first-quarter 2020 adjusted earnings of 62 cents per share lagged the Zacks Consensus Estimate of 64 cents. Also, the bottom line decreased 10% from the prior-year quarter.
Interactive Brokers Group’s (IBKR - Free Report) first-quarter 2020 adjusted earnings per share of 69 cents surpassed the Zacks Consensus Estimate of 67 cents. The figure was 25.5% higher than the prior-year earnings.
Moelis & Company’s (MC - Free Report) first-quarter 2020 adjusted earnings of 45 cents per share surpassed the Zacks Consensus Estimate of 37 cents. Moreover, the figure was 66.7% higher than the year-ago quarter’s reported number.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>