On January 4, 2013, we reiterated our long-term 'Neutral'
Raymond James Financial Inc.
) based on the company's focus on opportunistic acquisitions and
robust capital deployment activities. However, rising expenses
and stringent regulatory landscape remain the major causes of
concern for this Zacks Rank #3 (Hold) stock.
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RAYMOND JAS FIN (RJF): Free Stock Analysis
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Why the Neutral Stance?
We have maintained this stance since only one out of eight
estimates over the last 60 days has moved north, increasing the
Zacks Consensus Estimate for fiscal 2013 by 1.9%. In addition,
over the past four quarters, Raymond James has delivered an
average earnings surprise of 4.1%. The company is expected to
announce its fiscal first quarter 2013 results on January 23.
The Zacks Consensus Estimate for the fiscal first quarter is
pegged at 70 cents along with a revenue estimate of $1,089
million. The company had delivered better-than-expected fiscal
fourth-quarter earnings on the back of 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 stable liquidity position are the positives
for Raymond James. The recent acquisitions of Morgan Keegan and
MK Holding from
Regions Financial Corp.
) will significantly expand its brokerage and capital markets
operations. Going forward, Raymond James is expected to pursue
more acquisitions that will enhance its market share and revenue.
However, escalating operating expenses remain a major headwind
for Raymond James. Continuously rising compensation costs along
with spurt in acquisitions are expected to further increase the
expenses, putting the bottom line under pressure. In addition,
the company's profitability remains vulnerable to the stringent
regulatory landscape and absence of geographical diversification.
Other stocks to consider
Other stocks in the bank sector that are performing well and are
worth considering include
Heartland Financial USA Inc.
). These companies carry a Zacks Rank #1 (Strong Buy).