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Raymond James Q4 Earnings Lag on Elevated Costs

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Shares of Raymond James Financial Inc.RJF have increased nearly 3% since the company announced its fiscal fourth-quarter and full-year 2015 (ended Sep 30) results on Oct 21. Earnings per share of 88 cents lagged the Zacks Consensus Estimate of 94 cents. Moreover, earnings came in 6% below the prior-year quarter figure.

Raymond James Financial Inc. - Earnings Surprise | FindTheBest

For fiscal 2015, earnings per share of $3.43 missed the Zacks Consensus Estimate of $3.50. However, the figure compared favorably with the year-ago tally of $3.32 per share.

Results were affected by higher costs, which were partially offset by a rise in revenues. Despite an earnings miss, investors' displayed positive sentiments on the back of enhanced performance of RJ Bank and Asset Management segments along with a consistent growth in assets.

Net income totaled $129.2 million, down 5% year over year. For fiscal 2015, net income came in at $502.1 million, up 5% year over year.

Performance Details

Net revenue amounted to $1.34 billion, improving 4% year over year. The increase was attributable to a rise in all revenue components except investment banking. Further, the reported figure surpassed the Zacks Consensus Estimate of $1.32 billion.

For fiscal 2015, net revenue summed $5.20 billion, up 7% year over year. The rise was mainly driven by an increase in all revenue components except investment banking and net trading profit. Further, the reported figure outpaced the Zacks Consensus Estimate of $5.15 billion.

Segment-wise for the reported quarter, Others recorded the highest total revenues increase of 104%, followed by RJ Bank that witnessed a 16% rise. Further, Private Client Group and Asset Management experienced revenue growth of 4% and 5%, respectively, while Capital Markets reported a marginal decrease in total revenue.

Non-interest expenses rose 6% from the prior-year quarter to $1.14 billion. The rise was triggered by an increase in all expense components except clearance and floor brokerage costs.

As of Sep 30, 2015, on a year-over-year basis, client assets under administration grew 1% to $480.0 billion, while financial AUM rose 1% to $65.2 billion.

Balance Sheet & Ratios

As of Sep 30, 2015, Raymond James reported total assets of $26.5 billion, up 14% year over year. Further, shareholders' equity came in at $4.52 billion, rising 9% year over year.

Book value per share stood at $31.68, up from $29.40 as of Sep 30, 2014.

As of Sep 30, 2015, total capital ratio came in at 23.0%, up from 20.6% as of Sep 30, 2014. Also, Tier 1 capital ratio stood at 22.0%, increasing from 19.7% in the year-ago corresponding period.

However, return on equity (on an annualized basis) came in at 11.5% as of Sep 30, 2015, down from 13.4% a year ago.

Our Take

Raymond James' consistent efforts to enhance segmental performance, supported by its robust balance sheet, are expected to yield positive results going forward. Also, the company's asset strength and synergies from acquisitions are likely to be accretive to earnings.

However, Raymond James' mounting costs call for better expense-management to ease the pressure on financials. Further, rising regulatory issues and a prevalent low interest-rate environment remain matters of concern.

Currently, Raymond James carries a Zacks Rank #4 (Sell).

Performance of Other Investment Brokerage Firms

The Charles Schwab Corp.'s SCHW third-quarter 2015 adjusted earnings of 27 cents per share surpassed the Zacks Consensus Estimate by 3.8%. Moreover, the bottom line was up 3% year over year.

Interactive Brokers Group, Inc. IBKR reported third-quarter 2015 adjusted earnings per share of 35 cents, which outpaced the Zacks Consensus Estimate of 31 cents. Also, earnings compared favorably with the year-ago quarter figure of 5 cents per share.

TD Ameritrade Holding Corporation AMTD is slated to report fiscal fourth-quarter and full-year 2015 (ending Sep 30) results on Oct 27.

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SCHWAB(CHAS) (SCHW): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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