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Higher Costs Hurt Raymond James (RJF) Profits: Time to Sell?
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Raymond James Financial’s (RJF - Free Report) bottom line is likely to be hurt by continuously rising expenses. Further, the lack of geographic diversification remains a concern for the company.
The company’s price performance does not look very impressive either. Its shares have lost 1.3% over the past six months compared with 9.6% decline of the industry.
Moreover, Raymond James’ Zacks Consensus Estimate for fiscal 2018 earnings have been revised 2.7% downward over the past 30 days, reflecting that analysts are not very optimistic regarding its earnings growth potential. As a result, it currently carries a Zacks Rank #4 (Sell).
Looking at the fundamentals, the company’s expenses have increased at a CAGR of 9.5% over the last four fiscals (2014-2017), mainly due to rising compensation costs and higher bank loan loss provisions. While the company remains focused on disciplined expense management, regulatory changes and a highly competitive environment are likely to lead to further rise in expenses, thereby, hurting bottom-line growth.
Moreover, the company is yet to diversify its footprint successfully. It derives more than 90% of its revenues from operations in the United States. Though it has operations in Canada and Europe, along with joint ventures in Latin America, these contribute a much lesser proportion of revenues in comparison with the United States. Thus, concentration risk, arising from lack of geographic diversification, might hamper financials.
Nevertheless, supported by a solid liquidity position, Raymond James has accomplished several deals over the last few years. Such acquisitions place the company well for future growth. Also, the company remains well poised for organic growth, given the continued improvement in loan balances.
Evercore’s Zacks Consensus Estimate for the current-year earnings has moved marginally upward over the past 60 days. The company’s shares have surged 45.1% over the past 12 months.
Moelis & Company’s current year earnings estimates have been revised 5.6% upward over the past 60 days. Its shares have surged 51.9% in the past year.
Over the past 60 days, Stifel Financial’s current-year earnings estimates have been revised 3.2% upward. Over the past 12 months, the company’s shares have rallied 13.5%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Higher Costs Hurt Raymond James (RJF) Profits: Time to Sell?
Raymond James Financial’s (RJF - Free Report) bottom line is likely to be hurt by continuously rising expenses. Further, the lack of geographic diversification remains a concern for the company.
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The company’s price performance does not look very impressive either. Its shares have lost 1.3% over the past six months compared with 9.6% decline of the industry.
Moreover, Raymond James’ Zacks Consensus Estimate for fiscal 2018 earnings have been revised 2.7% downward over the past 30 days, reflecting that analysts are not very optimistic regarding its earnings growth potential. As a result, it currently carries a Zacks Rank #4 (Sell).
Looking at the fundamentals, the company’s expenses have increased at a CAGR of 9.5% over the last four fiscals (2014-2017), mainly due to rising compensation costs and higher bank loan loss provisions. While the company remains focused on disciplined expense management, regulatory changes and a highly competitive environment are likely to lead to further rise in expenses, thereby, hurting bottom-line growth.
Moreover, the company is yet to diversify its footprint successfully. It derives more than 90% of its revenues from operations in the United States. Though it has operations in Canada and Europe, along with joint ventures in Latin America, these contribute a much lesser proportion of revenues in comparison with the United States. Thus, concentration risk, arising from lack of geographic diversification, might hamper financials.
Nevertheless, supported by a solid liquidity position, Raymond James has accomplished several deals over the last few years. Such acquisitions place the company well for future growth. Also, the company remains well poised for organic growth, given the continued improvement in loan balances.
Stocks to Consider
A few better-ranked stocks in the same space worth considering are Evercore Inc. (EVR - Free Report) , Moelis & Company (MC - Free Report) and Stifel Financial Corp. (SF - Free Report) . Each of these currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Evercore’s Zacks Consensus Estimate for the current-year earnings has moved marginally upward over the past 60 days. The company’s shares have surged 45.1% over the past 12 months.
Moelis & Company’s current year earnings estimates have been revised 5.6% upward over the past 60 days. Its shares have surged 51.9% in the past year.
Over the past 60 days, Stifel Financial’s current-year earnings estimates have been revised 3.2% upward. Over the past 12 months, the company’s shares have rallied 13.5%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>