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Raymond James Financial, Inc. RJF is well poised to benefit from resurgence in deal-making activities, strategic acquisitions and interest rate cuts. Further, sustainable capital distributions on the back of a solid balance sheet and capital position are another positive.
The Zacks Consensus Estimate for Raymond James’ fiscal 2025 and fiscal 2026 has been revised marginally upward over the past month. The positive estimate revision indicates that analysts are optimistic regarding the company’s prospects and earnings potential.
Estimate Revision Trend
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RJF currently sports a Zacks Rank #1 (Strong Buy).
RJF’s Zacks Rank & Price Performance
Over the past six months, RJF shares have gained 34.8% compared with the industry’s rally of 21.7%.
Six-Month Price Performance Chart
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Growth Drivers for Raymond James’ Stock
Earnings Growth: Raymond James has witnessed earnings growth of 19.4% in the past three to five years, driven by a solid top-line performance and strategic buyouts. The number is also impressive compared with the industry average of 6.7%.
With the operating backdrop turning favorable for investment banks, the company’s earnings are expected to continue the upward momentum. Hence, we expect earnings to grow at the rate of 5.8%, 6.6%, and 4.2% in fiscal 2025, fiscal 2026 and fiscal 2027, respectively.
Revenue Strength: Raymond James remains focused on enhancing revenue growth. The company’s net revenues witnessed a CAGR of 10.6% in the last five fiscal years (2019-2024), primarily due to a rise in asset management and related administrative fees and decent capital markets performance.
Revenue Growth Trend
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Further, interest rate cuts implemented by the Federal Reserve have enhanced the liquidity in capital markets and improve deal-making activities, thereby aiding the company’s investment banking (IB) fee income.
Moreover, the Donald Trump-led administration will likely drive economic growth through expansionary initiatives, thus boosting capital markets and deal-making activities. This will likely complement the company’s brokerage revenues.
Additionally, Raymond James has been expanding through acquisitions, which will likely keep aiding its top-line expansion. Our estimate for total net revenues implies a CAGR of 6.3% by fiscal 2027.
Strategic Acquisitions: Raymond James has undertaken several strategic expansion plans over the past few years, driven by its strong liquidity and balance sheet positions. This has also helped the company expand internationally, mainly in Europe and Canada.
This May, the company announced that it entered into the attractive private credit business through a collaboration with Eldridge Industries. In September 2023, RJF acquired Canada-based Solus Trust Company Limited. In fiscal 2022, the company acquired SumRidge Partners, TriState Capital Holdings and U.K.-based Charles Stanley Group PLC. These deals, along with several past ones, poise RJF well for future growth. Management looks forward to actively growing through acquisitions to further strengthen the Private Client Group and Asset Management segments.
Strong Balance Sheet: As of Sept. 30, 2024, Raymond James had a total debt of $3.09 billion and cash and cash equivalents worth $11 billion. Given the investment-grade ratings and stable outlook from leading rating agencies, as well as solid earnings strength, the company remains well-positioned to address its debt obligations even if the economic situation deteriorates.
Strong Capital Position: As of Sept. 30, 2024, the company’s common equity tier 1 ratio and total capital ratio were 22.6% and 24.1%, well-capitalized above regulatory requirements. This indicates a strong capital position, which enables the company to maintain capital distribution plans efficiently.
In December, the company announced an 11.1% hike in the quarterly dividend to 50 cents per share. RJF has increased its dividend six times in the last five years with an annualized dividend growth rate of 18.1%.