The bullish stock market is boosting growth at this diversified financial company.
Raymond James Financial, Inc. (RJF)
From Argus Weekly Staff Report
We are reiterating our BUY rating on Focus List selection Raymond James Financial Inc. (RJF), a provider of diversified financial services. The company reported solid fiscal 1Q20 EPS of $1.89, up from $1.69 a year earlier, driven by record revenues in the Private Client Group, Asset Management, and Raymond James Bank.
Looking ahead, we expect revenues to increase in the Private Client Group and Asset Management as net inflows continue to grow. We also look for an increase in net interest income
generated by Raymond James Bank. We expect the company to remain in expansion mode as it brings additional advisers to its platform and makes strategic acquisitions that fit within its
long-term plan.
RJF organizes its businesses into four segments: Private Client Group, Capital Markets, Asset Management, and Raymond James Bank. We look at recent trends and outlooks for these segments below. Private Client Group net revenues of $1.41 billion (70% of net revenue) rose 4% year-over-year in 4Q, aided by record assets under administration in fee-based accounts.
Capital Markets net revenue rose 6% to $268 million (13% of net revenue), driven by increased revenue in fixed-income brokerage and underwriting in the debt and equity markets. Asset Management net revenue rose 6% to $184 million (8% of net revenue), reflecting net inflows and market appreciation.
At Raymond James Bank, net revenue rose 6% to $216 million (9% of net revenue), driven mainly by increased mortgage banking loan growth. Net loans rose 7% to $21.3 billion. The net interest margin decreased seven basis points to 3.23%. The loan loss provision fell to 1.01% from 1.10% in the prior-year quarter, and the percentage of nonperforming assets fell to 0.16% from 0.21% a year earlier.
We are maintaining our FY20 EPS estimate of $7.83 and our FY21 estimate of $8.00.
RJF shares are trading at 11.4-times our FY20 EPS estimate, below their historical average range of 12-14. However, we believe a higher multiple is warranted based on the company’s growth prospects. We think that investors will continue to focus on the company’s growth in assets under management, strategic acquisitions, and plans to expand the number of advisers.
Jim Kelleher, CFA, Argus Weekly Staff Report, www.argusresearch.com, 212-425-7500, January 2020