Raymond James Financial Inc.
) fiscal third quarter 2012 (ended June 30) earnings per share came
in at 64 cents, marginally missing the Zacks Consensus Estimate of
67 cents. However, this exceeded the prior-year quarter earnings of
Lower-than-expected results were due to the escalating non-interest
expenses, partially offset by improving top line. Also, a hike in
assets, assets under management and assets under administration
were the positives for the quarter.
After considering certain non-recurring items, the company reported
income of $76.4 million or 55 cents per share compared with $46.8
million or 37 cents per share in the prior-year quarter.
In April, Raymond James completed the all-cash acquisition of
Morgan Keegan and MK Holding and certain of its related affiliates
Regions Financial Corp.
) for about $1.2 billion.
Behind the Headlines
Raymond James recorded fiscal third-quarter total revenue of
$1,115.8 million, up 29% year over year. The elevation was largely
driven by increase in net trading profits, securities commissions
and fees, interest income as well as other revenues. This also
compares favorably with the Zacks Consensus Estimate of $969.0
Non-interest expenses climbed 23% from the prior-year quarter to
$948.2 million. The quarter under review included a $21 million
pretax charge for acquisition-related expenses, whereas the
year-ago quarter incorporated a one-time charge of $45 million
related to the repurchase of auction rate securities.
The hike in operating expenses was primarily attributable to
rise in compensation, commissions and benefits, communications and
information processing charges as well as higher occupancy and
As of June 30, 2012, assets under administration grew 35% year over
year to $376 billion. Similarly, assets under management totaled
$41 billion, expanding 11% from the year-ago quarter.
As of June 30, 2012, Raymond James reported total assets of $21.0
billion and shareholders equity of $3.2 billion. Book value per
share at the end of fiscal third quarter was $23.29.
Amidst the slowly recovering market, Raymond James' solid balance
sheet and its efforts to boost revenue by recruiting experienced
advisors are expected to be accretive to its financials in the
upcoming quarters. Moreover, the company's capital strength and
capital deployment activities should make its stock attractive to
On the other hand, the regulatory issues, a low-interest rate
environment and increasing expenses will likely put the company's
profitability under pressure.
LPL FINL HLDGS (LPLA): Free Stock Analysis
REGIONS FINL CP (RF): Free Stock Analysis
RAYMOND JAS FIN (RJF): Free Stock Analysis
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Currently, Raymond James retains a Zacks #3 Rank, which translates
into a short-term Hold rating. Considering the fundamentals, we
maintain a long-term Neutral recommendation on the stock.
One of its peers,
LPL Financial Holdings Inc.
), is scheduled to announce its second-quarter results on July