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LPL Financial (LPLA) Gains 39.1% YTD: Will the Rally Continue?
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Shares of LPL Financial Holdings Inc. (LPLA - Free Report) have gained 39.1% year to date. This compares favorably with the industry’s fall of 12.7% and the S&P 500’s decline of 13.9% in the same period.
Apart from the robust year-to-date price performance, the company’s performance was impressive last year as well. Despite the near-zero interest rate environment and the continued uncertainty related to the coronavirus pandemic, LPLA’s shares gained 53.6% in 2021, outperforming the industry’s rally of 34.3%.
LPLA’s solid performance has been driven by solid advisor productivity, along with the company’s recruiting and inorganic growth efforts.
Image Source: Zacks Investment Research
Analysts are optimistic regarding this Zacks Rank #1 (Strong Buy) stock’s earnings growth prospects. Over the past 30 days, the Zacks Consensus Estimate for LPLA’s 2022 earnings has been revised 2.3% upward.
Let’s take a look at the key factors that are likely to keep supporting LPL Financial’s steady price appreciation.
Revenue Growth Initiatives: LPL Financial has been making efforts to increase its client base. The company’s advisory revenues (constituting 50% of total revenues in the first half of 2022) have been increasing over the past several years. Advisory revenues witnessed a six-year (2016-2021) compound annual growth rate of 22.3%, with the uptrend continuing in the first six months of 2022.
Given the company’s recruiting efforts and solid advisor productivity, advisory revenues are expected to keep improving in the quarters ahead. The acquisition of Allen & Company and the launch of a no-transaction-fee exchange-traded fund network will likely continue to boost the value of LPL Financial’s advisory platform.
Notably, in 2022, LPLA is expected to witness top-line growth of 10.8%, while in 2023, its top line is projected to grow 14.6%.
Inorganic Expansion Efforts: LPL Financial has accomplished several strategic deals over the past few years. This July, it entered an agreement to acquire the private client group business of Boenning & Scattergood. In 2021, it acquired Waddell & Reed's wealth management business for $300 million. In October 2020, the company acquired Blaze Portfolio, while in August, it acquired the assets of E.K. Riley Investments, LLC and Lucia Securities. These, along with the past inorganic expansion efforts, will continue to support growth and help LPL Financial diversify revenues.
Earnings Strength: LPLA has witnessed earnings growth of 20.47% in the past three to five years, higher than the industry average of 19.76%. The uptrend is expected to continue in the near term. The company’s earnings are projected to grow 45.7% in 2022 and 62% in 2023. Further, its long-term (three-five years) projected earnings growth rate of 38.87% promises rewards for investors.
Solid Balance Sheet & Capital Positions: As of Jun 30, 2022, LPL Financial had net long-term and other borrowings worth $2.72 billion, and cash and cash equivalents of $700.4 million. Nonetheless, the company has a revolving credit facility, which will not mature anytime soon. Also, its investment-grade ratings of Baa3/BB+, and outlook of Positive from Moody’s Investors Service and Standard & Poor, respectively, render the company favorable access to the credit markets.
Thus, despite a high debt burden, the company is expected to continue to meet debt obligations in the near term, even if the economic situation worsens.
Moreover, given a solid capital position, the company is expected to continue to be able to sustain efficient capital deployments in the future. LPLA pays dividends on a quarterly basis. Also, it has a share buyback program in place, which had been paused in response to the concerns surrounding the coronavirus outbreak. However, the company resumed repurchases in the third quarter of 2021 and targets buybacks of $40 million per quarter. As of Jun 30, 2022, LPL Financial had $159.8 million worth of shares left to be repurchased.
The Zacks Consensus Estimate for Associated Banc-Corp’s 2022 earnings has moved 16% upward over the past 60 days. In the past three months, ASB’s shares have gained 4.2%.
The Zacks Consensus Estimate for Zions’ 2022 earnings has been revised 6.6% upward over the past 60 days. ZION’s shares have gained 2.2% in the past three months.
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LPL Financial (LPLA) Gains 39.1% YTD: Will the Rally Continue?
Shares of LPL Financial Holdings Inc. (LPLA - Free Report) have gained 39.1% year to date. This compares favorably with the industry’s fall of 12.7% and the S&P 500’s decline of 13.9% in the same period.
Apart from the robust year-to-date price performance, the company’s performance was impressive last year as well. Despite the near-zero interest rate environment and the continued uncertainty related to the coronavirus pandemic, LPLA’s shares gained 53.6% in 2021, outperforming the industry’s rally of 34.3%.
LPLA’s solid performance has been driven by solid advisor productivity, along with the company’s recruiting and inorganic growth efforts.
Image Source: Zacks Investment Research
Analysts are optimistic regarding this Zacks Rank #1 (Strong Buy) stock’s earnings growth prospects. Over the past 30 days, the Zacks Consensus Estimate for LPLA’s 2022 earnings has been revised 2.3% upward.
Let’s take a look at the key factors that are likely to keep supporting LPL Financial’s steady price appreciation.
Revenue Growth Initiatives: LPL Financial has been making efforts to increase its client base. The company’s advisory revenues (constituting 50% of total revenues in the first half of 2022) have been increasing over the past several years. Advisory revenues witnessed a six-year (2016-2021) compound annual growth rate of 22.3%, with the uptrend continuing in the first six months of 2022.
Given the company’s recruiting efforts and solid advisor productivity, advisory revenues are expected to keep improving in the quarters ahead. The acquisition of Allen & Company and the launch of a no-transaction-fee exchange-traded fund network will likely continue to boost the value of LPL Financial’s advisory platform.
Notably, in 2022, LPLA is expected to witness top-line growth of 10.8%, while in 2023, its top line is projected to grow 14.6%.
Inorganic Expansion Efforts: LPL Financial has accomplished several strategic deals over the past few years. This July, it entered an agreement to acquire the private client group business of Boenning & Scattergood. In 2021, it acquired Waddell & Reed's wealth management business for $300 million. In October 2020, the company acquired Blaze Portfolio, while in August, it acquired the assets of E.K. Riley Investments, LLC and Lucia Securities. These, along with the past inorganic expansion efforts, will continue to support growth and help LPL Financial diversify revenues.
Earnings Strength: LPLA has witnessed earnings growth of 20.47% in the past three to five years, higher than the industry average of 19.76%. The uptrend is expected to continue in the near term. The company’s earnings are projected to grow 45.7% in 2022 and 62% in 2023. Further, its long-term (three-five years) projected earnings growth rate of 38.87% promises rewards for investors.
Solid Balance Sheet & Capital Positions: As of Jun 30, 2022, LPL Financial had net long-term and other borrowings worth $2.72 billion, and cash and cash equivalents of $700.4 million. Nonetheless, the company has a revolving credit facility, which will not mature anytime soon. Also, its investment-grade ratings of Baa3/BB+, and outlook of Positive from Moody’s Investors Service and Standard & Poor, respectively, render the company favorable access to the credit markets.
Thus, despite a high debt burden, the company is expected to continue to meet debt obligations in the near term, even if the economic situation worsens.
Moreover, given a solid capital position, the company is expected to continue to be able to sustain efficient capital deployments in the future. LPLA pays dividends on a quarterly basis. Also, it has a share buyback program in place, which had been paused in response to the concerns surrounding the coronavirus outbreak. However, the company resumed repurchases in the third quarter of 2021 and targets buybacks of $40 million per quarter. As of Jun 30, 2022, LPL Financial had $159.8 million worth of shares left to be repurchased.
Other Finance Stocks Worth Considering
A couple of other top-ranked stocks from the finance space are Associated Banc-Corp (ASB - Free Report) and Zions Bancorporation (ZION - Free Report) . While ASB currently carries a Zacks Rank #2 (Buy), ZION sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Associated Banc-Corp’s 2022 earnings has moved 16% upward over the past 60 days. In the past three months, ASB’s shares have gained 4.2%.
The Zacks Consensus Estimate for Zions’ 2022 earnings has been revised 6.6% upward over the past 60 days. ZION’s shares have gained 2.2% in the past three months.