On Jun 24, 2013, we downgraded our long-term recommendation on
Raymond James Financial, Inc.
) to Underperform from Neutral. This was based on
lower-than-expected fiscal second-quarter (ended Mar 31) results.
Why the Downgrade?
Raymond James' earnings per share lagged the Zacks Consensus
Estimate. Increased expenses were the primary dampener for the
quarter, but the company witnessed improved top line. Notably,
growth in assets under management (AUM) and assets under
administration were among the positives.
Further, estimates over the past 60 days have been declining,
with the Zacks Consensus Estimate for fiscal 2013 going down 9.4%
to $2.78 per share. Moreover, for fiscal 2014, the Zacks
Consensus Estimate declined fell 7.7% to $3.37 over the same time
frame. Hence, with the estimates for both the years falling,
Raymond James now has a Zacks Rank #4 (Sell).
Other Areas of Concern
Mounting operating expenses is another cause of concern for
Raymond James. Due to acquisitions and a rise in compensation
expenses, non-interest expenses are expected to increase further,
thereby exerting additional pressure on the bottom line.
Moreover, Raymond James is yet to successfully expand its
footprint globally. Though it does have operations outside the
U.S., these are lesser in proportion. Hence, the sluggish
economic recovery and low interest-rate environment in the U.S.
could impact its financials.
Other Stocks Worth Considering
While we prefer to avoid Raymond James, other better performing
investment brokers include
Investment Technology Group Inc.
Ladenburg Thalmann Financial Services Inc.
) - with a Zacks Rank #1 (Strong Buy) as well as
GAIN Capital Holdings, Inc.
) - a Zacks Rank #2 (Buy).
RAYMOND JAS FIN (RJF): Free Stock Analysis
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