The stock market has had a turbulent year due to the war between Ukraine and Russia, supply chain disruption, multi-decade high inflation, and the Fed’s aggressive interest rate hikes. After hiking the benchmark interest rates thrice this year, the Fed is expected to hike the rates by 75 basis points this week.

The increase in interest rates bodes well for financial institutions, including banks, as it helps them increase their revenues. Investors’ interest in banking stocks is evident from the SPDR S&P Bank ETF’s (KBE) 5.9% gain over the past month.

Shares of Raymond James Financial, Inc. (RJF - Get Rating) have gained 7.9% in price over the past month and 11.8% over the past year to close the last trading session at $95.73.

RJF is a financial holding company that is engaged in various financial services activities, including providing investment management services to retail and institutional clients, merger & acquisition and advisory services, the underwriting, distribution, trading, and brokerage of equity and debt securities, and the sale of mutual funds and other investment products.

It also provides corporate and retail banking services and trust services. The company operates through five segments: Private Client Group; Capital Markets; Asset Management; Raymond James Bank; and Other.

Here’s what could influence RJF’s performance in the upcoming months:

Mixed Financials

RJF’s total assets increased 30.3% year-over-year to $73.10 billion for the second quarter ended March 31, 2022. The company’s net interest income increased 25.1% year-over-year to $204 million. Also, its total net revenues increased 13% year-over-year to $2.67 billion.

However, its adjusted net income declined 7% year-over-year to $331 million. Its adjusted EPS decreased 8% year-over-year to $1.55.

Favorable Analyst Estimates

Analysts expect RJF’s revenue for fiscal 2022 and 2023 to increase 11% and 10.5% year-over-year to $10.84 billion and $11.98 billion, respectively. Its EPS for fiscal 2022 and 2023 is expected to increase 4.4% and 25.6% year-over-year to $7.37 and $9.25, respectively.

Mixed Valuation

In terms of forward non-GAAP P/E, RJF’s 13x is 30.3% higher than the 9.97x industry average. Likewise, its 2.15x forward P/B is 90.7% higher than the 1.13x industry average.

However, its 1.91x forward P/S is 33% lower than the 2.86x industry average. In addition, its 4.40x trailing-12-month P/CF is 41% lower than the 7.45x industry average.

Higher-than-industry Profitability

In terms of trailing-12-month gross profit margin, RJF’s 94.25% is 46.2% higher than the 64.46% industry average. Likewise, its 18.56% trailing-12-month ROCE is 51.1% higher than the industry average of 12.28%. Furthermore, the stock’s trailing-12-month ROA came in at 2.06%, compared to the industry average of 1.24%.

POWR Ratings Show Promise

RJF has an overall rating of B, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. RJF has a B grade for Quality, consistent with its high profitability.

It has a C grade for Value, justifying its mixed valuation. The stock is trading above its 10-day and 50-day moving averages of $91.73 and $92.27, respectively, in sync with its B grade for Momentum.

RJF is ranked #3 out of 24 stocks in the Investment Brokerage industry. Click here to access RJF’s Growth, Stability, and Sentiment ratings.

Bottom Line

RJF is currently trading above its 10-day and 50-day moving averages, indicating an uptrend. The company is expected to benefit from the Federal Reserve’s interest rate hikes as it will help increase its net interest income. Given the favorable analyst estimates and higher-than-industry profitability, it could be wise to buy the stock now.

How Does Raymond James Financial, Inc.’s (RJF) Stack Up Against its Peers?

RJF has an overall POWR Rating of B, equating to a Buy rating. You might want to consider investing in the other Investment Brokerage stocks with a B (Buy) rating: BGC Partners, Inc. (BGCP - Get Rating) and PJT Partners Inc. (PJT - Get Rating).

RJF shares were trading at $95.81 per share on Monday afternoon, up $0.08 (+0.08%). Year-to-date, RJF has declined -3.59%, versus a -16.21% rise in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...

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