Why is Raymond James Financial (RJF) up 1.2% since its last earnings report?

It has been approximately a month since Raymond James Financial, Inc. last reported earnings. (RJF). Shares rose about 1.2% in that time, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Raymond James Financial headed for a recession? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the company’s most recent earnings report in order to better understand the important catalysts.

No Raymond James profits in Q2, revenues grow year over year

Raymond James’s fiscal second-quarter 2024 (ended March 31) adjusted earnings of $2.31 per share were a penny below the Zacks Consensus Estimate. However, the financial result increased by 14% compared to the previous year’s quarter.

Higher non-interest costs had a negative impact on the results. Additionally, RJF recorded a provision for bank loans to cover loan losses in the quarter due to the challenging macroeconomic outlook. However, strong investment banking and brokerage performance helped drive the Capital Markets segment’s performance. The Private Client Group and Asset Management segments also achieved good results. Acquisitions that have taken place in recent years have supported the company’s finances to some extent.

Net income available to common stockholders (GAAP) was $474 million, or $2.22 per share, compared to $425 million, or $1.93 per share, in the prior-year quarter.

Revenues are rising, costs are rising

Net revenue was $3.12 billion, up 9% year-over-year. The top line was in line with the Zacks Consensus Estimate.

Segmentally, the Private Clients Group recorded a 9% increase in net revenues in the reported quarter, Asset Management’s net revenues increased by 17% and Capital Markets’ revenues increased by 6%. Moreover, the remaining companies recorded a 70% increase in revenues. The bank recorded a decline in net revenues by 21% compared to the previous year.

Noninterest expenses increased 8% year-over-year to $2.51 billion. The increase was mainly due to higher costs of salaries, commissions and benefits, as well as investment advisory fees. Our estimate for non-interest expenses was also $2.44 billion. In addition, RJF recorded a bank loan provision to cover credit losses in the amount of USD 21 million.

As of March 31, 2024, client assets under management were $1.45 trillion, an increase of 18% compared to the end of the prior-year quarter. Financial assets under management of $226.8 billion increased 17%. Our estimates for client assets under management and financial assets under management were $1.32 trillion and $206.2 billion, respectively.

Balance sheet and capital ratios are strong

As of March 31, 2024, Raymond James has total assets of $81.23 billion, up 1% from the previous quarter. Total equity increased 2% to $10.91 billion.
Book value per share was $52.60, compared to $46.67 as of March 31, 2023.

As of March 31, 2024, the total capital ratio was 23.3% compared to 21.4% as of March 31, 2023. The Tier 1 capital ratio was 21.9% compared to 20.1% at the end of March 2023 .

Return on equity (annualized) at the end of the reporting quarter was 17.5% compared to 17.3% a year earlier.

Share an update on the buyback

During the reported quarter, RJF repurchased 1.7 million shares for $207 million.

Perspectives

The Company expects that total net interest income and RJBDP fees from third-party banks will be largely dependent on short-term interest rates, the stability of customer cash balances and loan growth trajectories.

For fiscal year 2024, the company expects non-compensation costs, excluding reserves for credit losses and unexpected legal and regulatory issues, to be $1.9 billion.

In the Private Client Group, fiscal third quarter results are expected to be positively impacted by a 7% sequential increase in fee-based assets and accounts.

The effective tax rate is expected to be 24% on a quarterly basis.

How have estimates changed since then?

It turns out that estimate revisions have been on a downward trend over the past month.

VGM results

Currently, Raymond James Financial has a weak Growth Score of D, but its Momentum Score is doing much better at B. Following the exact same trajectory, the stock was rated a B for Value, putting it in the top 40% for this investment strategy.

Overall, the stock has a Total VGM Score of C. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. Notably, Raymond James Financial carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Industry player performance

Raymond James Financial is part of the Zacks Financial – Investment Bank industry. Over the past month, Interactive Brokers Group, Inc. (IBKR) from the same industry gained 6%. More than a month ago, the company published its results for the quarter ended March 2024.

In the most recent quarter, Interactive Brokers reported revenues of $1.2 billion, representing a year-over-year change of +13.9%. EPS of $1.64 in the same period compared to $1.35 a year ago.

Interactive Brokers is expected to report earnings per share of $1.59 for the current quarter, which would represent a year-over-year change of +20.5%. Over the past 30 days, the Zacks Consensus Estimate has moved +0.4%.

Interactive Brokers has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Rating of F.

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