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Why Is Raymond James Financial, Inc. (RJF) Down 0.2% Since Last Earnings Report?
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A month has gone by since the last earnings report for Raymond James Financial, Inc. (RJF - Free Report) . Shares have lost about 0.2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Raymond James Financial, Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Raymond James Q2 Earnings Beat, Revenues & Costs Up Y/Y
Raymond James’ second-quarter fiscal 2021 (ended Mar 31) adjusted earnings of $2.51 per share comfortably surpassed the Zacks Consensus Estimate of $2.09. Also, the bottom line was up significantly from the prior-year quarter’s $1.20.
Results benefited from impressive Capital Markets segment performance, which majorly drove revenue growth. Also, a rise in assets balance, provision benefit and strong balance sheet position were the tailwinds. However, higher operating expenses posed an undermining factor.
Net income (GAAP basis) was $355 million, up 12% from the prior-year quarter.
Revenues & Costs Rise
Net revenues were $2.37 billion, increasing 15% year over year. The rise was largely driven by higher total brokerage revenues and investment banking income. The top line also beat the Zacks Consensus Estimate of $2.23 billion.
Segment wise in the reported quarter, RJ Bank registered a decline of 24% from the prior year in net revenues. Nonetheless, Private Client Group and Asset Management recorded 10% and 14% rise in revenues, respectively. Further, Capital Markets’ top line surged 49% from the year-ago quarter. Others recorded net negative revenues of $12 million.
Non-interest expenses were up 5% to $1.93 billion. The increase was mainly due to higher compensation, commissions and benefits, and communications and information processing, which were partly offset by provision benefit.
As of Mar 31, 2021, client assets under administration were $1.09 trillion, up 40% from the end of the prior-year quarter. Financial assets under management were $178.2 billion, up 39%.
Strong Balance Sheet & Capital Ratios
As of Mar 31, 2021, Raymond James reported total assets of $56.1 billion, up 4% sequentially. Total equity increased 3% from the fiscal first quarter to $7.6 billion.
Book value per share was $55.34, up from $49.69 as of Mar 31, 2020.
As of Mar 31, 2021, total capital ratio was 24.7% compared with 25.3% as of the Mar 31, 2020 level. Tier 1 capital ratio was 23.6% compared with 24.1% as of March 2020-end.
Return on equity (annualized basis) was 19% at the end of the reported quarter compared with 9.9% in the prior-year period.
Share Repurchase Update
In the reported quarter, Raymond James repurchased approximately 0.5 million shares for $60 million.
Outlook
Management expects assets and fee-based accounts in PCG segment to increase 7% sequentially in third-quarter fiscal 2021.
Based on the strong pipeline and activity levels, the company anticipates fixed income brokerage results to remain elevated, mainly in the Depository Client segment. Notably, IB revenues are expected to be $200 million per quarter, on an average.
Given prepayment speeds of higher-yielding securities and mortgages, the company expects Raymond James Bank’s NIM to decline to 1.90% for the remainder of the year.
In the Asset Management segment, results are expected to be positively impacted by higher financial assets under management, provided the equity markets remain resilient.
Driven by near-zero short-term interest rates and the successful implementation of the expense initiative, the company continues to target a compensation ratio of 70% or better.
The company targets to achieve 14-15% pre-tax margin on the consolidated basis amid near-zero interest rate environment.
In the fiscal third quarter, the company expects to incur losses of $90 million related to the early extinguishment of senior notes.
Given the strong capital and liquidity position, the company expect to continue share repurchases of at least $50 million per quarter to offset share-based compensation dilution in fiscal 2021.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 15.05% due to these changes.
VGM Scores
Currently, Raymond James Financial, Inc. has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Raymond James Financial, Inc. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Raymond James Financial, Inc. (RJF) Down 0.2% Since Last Earnings Report?
A month has gone by since the last earnings report for Raymond James Financial, Inc. (RJF - Free Report) . Shares have lost about 0.2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Raymond James Financial, Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Raymond James Q2 Earnings Beat, Revenues & Costs Up Y/Y
Raymond James’ second-quarter fiscal 2021 (ended Mar 31) adjusted earnings of $2.51 per share comfortably surpassed the Zacks Consensus Estimate of $2.09. Also, the bottom line was up significantly from the prior-year quarter’s $1.20.
Results benefited from impressive Capital Markets segment performance, which majorly drove revenue growth. Also, a rise in assets balance, provision benefit and strong balance sheet position were the tailwinds. However, higher operating expenses posed an undermining factor.
Net income (GAAP basis) was $355 million, up 12% from the prior-year quarter.
Revenues & Costs Rise
Net revenues were $2.37 billion, increasing 15% year over year. The rise was largely driven by higher total brokerage revenues and investment banking income. The top line also beat the Zacks Consensus Estimate of $2.23 billion.
Segment wise in the reported quarter, RJ Bank registered a decline of 24% from the prior year in net revenues. Nonetheless, Private Client Group and Asset Management recorded 10% and 14% rise in revenues, respectively. Further, Capital Markets’ top line surged 49% from the year-ago quarter. Others recorded net negative revenues of $12 million.
Non-interest expenses were up 5% to $1.93 billion. The increase was mainly due to higher compensation, commissions and benefits, and communications and information processing, which were partly offset by provision benefit.
As of Mar 31, 2021, client assets under administration were $1.09 trillion, up 40% from the end of the prior-year quarter. Financial assets under management were $178.2 billion, up 39%.
Strong Balance Sheet & Capital Ratios
As of Mar 31, 2021, Raymond James reported total assets of $56.1 billion, up 4% sequentially. Total equity increased 3% from the fiscal first quarter to $7.6 billion.
Book value per share was $55.34, up from $49.69 as of Mar 31, 2020.
As of Mar 31, 2021, total capital ratio was 24.7% compared with 25.3% as of the Mar 31, 2020 level. Tier 1 capital ratio was 23.6% compared with 24.1% as of March 2020-end.
Return on equity (annualized basis) was 19% at the end of the reported quarter compared with 9.9% in the prior-year period.
Share Repurchase Update
In the reported quarter, Raymond James repurchased approximately 0.5 million shares for $60 million.
Outlook
Management expects assets and fee-based accounts in PCG segment to increase 7% sequentially in third-quarter fiscal 2021.
Based on the strong pipeline and activity levels, the company anticipates fixed income brokerage results to remain elevated, mainly in the Depository Client segment. Notably, IB revenues are expected to be $200 million per quarter, on an average.
Given prepayment speeds of higher-yielding securities and mortgages, the company expects Raymond James Bank’s NIM to decline to 1.90% for the remainder of the year.
In the Asset Management segment, results are expected to be positively impacted by higher financial assets under management, provided the equity markets remain resilient.
Driven by near-zero short-term interest rates and the successful implementation of the expense initiative, the company continues to target a compensation ratio of 70% or better.
The company targets to achieve 14-15% pre-tax margin on the consolidated basis amid near-zero interest rate environment.
In the fiscal third quarter, the company expects to incur losses of $90 million related to the early extinguishment of senior notes.
Given the strong capital and liquidity position, the company expect to continue share repurchases of at least $50 million per quarter to offset share-based compensation dilution in fiscal 2021.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 15.05% due to these changes.
VGM Scores
Currently, Raymond James Financial, Inc. has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Raymond James Financial, Inc. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.