On Apr 2, 2013, we maintained our Neutral recommendation on
Raymond James Financial, Inc
) based on its inorganic growth prospects and meaningful capital
deployment actions. However, escalating expenses and a stringent
regulatory landscape remain the major causes of concern for this
Zacks Rank #3 (Hold) stock.
Why the Neutral Stance?
Over the past 60 days, there was a marginal upward estimate
revision for 2013. Further, estimates for 2014 have slightly
improved over the same period.
The Zacks Consensus Estimate for fiscal second quarter 2013 is
pegged at 75 cents along with a revenue estimate of $1,114
million. The company delivered better-than-expected fiscal
first-quarter earnings on the back of an augmented top line,
partially offset by higher expenses.
Further, focus on inorganic growth, history of boosting
shareholders' value through meaningful capital deployment
activities along with a stable liquidity position are the
positives for Raymond James. The acquisitions of ClariVest Asset
Management, LLC, Morgan Keegan and MK Holding from
Regions Financial Corporation
) will considerably expand its brokerage and capital markets
operations. Going forward, Raymond James is expected to pursue
However, escalating operating expenses remain a major concern for
Raymond James. Increasing compensation costs along with a spurt
in acquisitions are expected to further elevate expenses, thus
pressurizing the bottom line. In addition, the company's
profitability remains vulnerable to the stringent regulatory
landscape and absence of geographical diversification.
Other Stocks to Consider
Other banking stocks that are performing well and are worth
Duff & Phelps Corporation
Knight Capital Group, Inc.
). While Duff & Phelps holds a Zacks Rank #1 (Strong Buy),
Knight Capital carries a Zacks Rank #2 (Buy).
DUFF&PHELPS CP (DUF): Free Stock Analysis
KNIGHT CAP GP (KCG): Free Stock Analysis
REGIONS FINL CP (RF): Free Stock Analysis
RAYMOND JAS FIN (RJF): Free Stock Analysis
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