Raymond James Financial Stock May Be Forming Flat Base

Raymond James Financial May Be Forming Flat Base

Raymond James Financial NYSE: RJF is up 25% since reporting fiscal first-quarter earnings on January 28. 

The company provides brokerage operations for a network of financial advisors and their clients. 

Earnings came in at $2.23 per share, beating analysts’ consensus estimates of $1.71 per share. That was an 18% increase from the year-ago quarter. 

Revenue was $2.22 billion for the quarter, also topping Wall Street’s expectations, and up 10% from the year-earlier quarter.

It marked the largest revenue growth in the past eight quarters. On the earnings side, it was a turnaround from three quarters in a row of decelerating earnings growth. 

Raymond James ended the quarter with $1.02 trillion in client assets under management, up 14% from the end of the prior-year quarter. That success was helped by big market-wide gains in November and another, smaller gain in December. 

In the earnings call, CEO Paul Reilly said the firm ended the quarter with 8,233 financial advisors, a net increase of 173 over the prior year, but a slight net decrease of 6 sequentially. 

“A flat advisor count is not unusual for this quarter, as we typically see an elevated number of retirements, at the year-end, where assets are typically retained at Raymond James by their successor,” Reilly said.

In other words, the assets generally remain at the firm even when an advisor leaves. 

Advisor recruitment is key to growth, as it’s the advisors who bring in new clients and new assets to manage.

Reilly noted that the firm’s advisor recruitment efforts have been going well.

Fixed-Income Trading Was Bright Spot

Contributing to the quarterly growth was $131 million from its fixed-income trading desk. Fixed-income underwriting fetched an additional $46 million. Those results exceeded revenue from rival investment banks and brokerages. 

Raymond James has a market capitalization of $16.37 billion. As a large-cap stock, and a component of the S&P 500 index, it’s a natural holding for any number of mutual funds. 

At the end of the last quarter, 1,279 funds held shares of Raymond James. The largest holder is the BlackRock Equity Dividend Fund, which holds 2.58% of shares outstanding. 

Meanwhile, shares of Raymond James comprise 3.20% of the Heartland Mid Cap Value Investing Fund.

On an institution-wide basis, the largest shareholders include BlackRock, Vanguard and State Street. 

In total, funds own 49% of shares, and Raymond James management owns 10.68%. 

Analysts’ consensus rating of the stock is “buy,” with a price target of $116.50. 

Wall Street expects earnings to hit $8.00 per share this year, which would be a 31% increase over 2020. Next year, earnings are pegged at $8.40 per share, a 5% increase. 

Raymond James’ one-year return is 80.75%. 

Outperforming Its Broader Sector

The stock is a component of the S&P financial sector, which sports a year-to-date gain of 17.27%. 

Since mid-January, the stock outperformed its sector. However, it lagged the sector through 2020.

In the great 2020 correction, Raymond James skidded 47% between February 21 and March 23.

After that steep selloff reset the base count, the stock cleared a handle buy point of $96.86 on trading volume that was 77% higher than normal on January 6. As it rallied, it mostly trended along its 10-day moving average, pulling back below that line at the time of its earnings report.

Even then, it tagged its 50-day line briefly and rebounded quickly. The stock has been trading in a sideways formation since mid-February, with a trading range of just 8%, which could qualify it as a flat base if this narrow pattern persists. 

The stock is setting up well for investors who may want to initiate a position or add shares. Because it only cleared its 2020 base in January, it’s not yet extended beyond a potential buy point.