Why Raymond James Financial, Inc. (NYSE: RJF) stock is under pressure

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Raymond James Financial, Inc. (NYSE: RJF) stock fell over 3.2% in the pre market session of January 22nd, 2020 (Source: Google finance) as the company missed the earnings estimate for the first quarter of FY 20. RJF in the first quarter of FY 20 has reported the adjusted earnings per share of $1.89, missing the analysts’ estimates for the adjusted earnings per share of $1.93. The company had reported the adjusted revenue growth of 4 percent to $2.01 billion in the first quarter of FY 20, which is in line with the analysts’ estimates for revenue of $2.01 billion. Net revenue rose 4% over the prior year’s fiscal first quarter on the back of higher Private Client Group assets in fee-based accounts.  These assets increased 31% over December 2018 and 9% over September 2019.  Net revenues fell 1% compared to the record number in the preceding quarter as sequential growth of asset management and related administrative fees and brokerage revenues was more than offset by the sequential decline of tax credit fund revenues, investment banking revenues, net interest income and Raymond James Bank Deposit Program (RJBDP) fees from third-party banks, which got negatively affected by lower short-term interest rates.

Moreover, for Private Client Group, during the first quarter 2019, the company reported 4% increase in the net revenues to $1.41 billion due to higher assets in fee-based accounts driven by the net addition of financial advisors, equity market appreciation and the increase in the utilization of fee-based accounts.  Private Client Group assets in fee-based accounts reached a new record of $444.2 billion, which represents 52% of the segment’s total client assets under administration at the end of the fiscal quarter.

For Capital Markets, during the first quarter 2019, the company reported 6% increase in the net revenues to  $268 million but down 11% compared to the preceding quarter on the back of  increases in fixed income brokerage revenues and both debt and equity underwriting revenues, which more than offset lower M&A revenues and equity brokerage revenues.  Sequentially, net revenues fell from the preceding quarter, mainly due to lower M&A revenues and tax credit fund revenues.

For Asset Management, during the first quarter 2019, the company reported 6% increase in the net revenues to  $184 million, and 3% over the preceding quarter on the back of growth of financial assets under management, as equity market appreciation and net inflows into fee-based accounts in the Private Client Group more than offset modest net outflows at Carillon Tower Advisers.

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