Raymond James beats EPS, hikes dividend as Capital Markets weakness lingers
Record client assets of $1.77T offset 21% plunge in investment banking revenue
Raymond James Financial reported fiscal first quarter results that encapsulated the divergent fortunes across its business lines, beating earnings expectations while highlighting persistent weakness in capital markets activity.
The St. Petersburg-based investment bank and wealth management firm reported adjusted earnings per share of $2.86, exceeding analyst estimates by three cents. Revenue of $3.74 billion fell slightly short of the $3.78 billion consensus forecast, reflecting the ongoing challenges in investment banking that have plagued the broader financial sector.
The earnings beat came alongside significant shareholder-friendly actions. The board approved an 8% dividend increase to $0.54 per share and continued share repurchases, buying back $400 million worth of stock during the quarter. The new dividend represents an annualized payout of $2.16 per share, up from $2.00 previously.
"Our solid first quarter results reflect the strength of our diversified business model and the dedication of our financial advisors," the company stated in its earnings release, highlighting what management described as "record client assets under administration" of $1.77 trillion, up 14% from the prior year.
The surge in client assets underscores the resilience of Raymond James's wealth management franchise, which has benefited from positive market movements and continued net asset flows. The firm's retail-focused model has provided relative stability compared to peers more heavily exposed to institutional capital markets.
However, the Capital Markets segment told a different story. Revenue in the unit plummeted 21% year-over-year to $380 million, driven by what the company described as "weak M&A activity" and challenging conditions across investment banking services. The decline mirrors broader industry trends, as dealmaking remains subdued in the face of elevated interest rates and economic uncertainty.
Shares of Raymond James were little changed in afternoon trading, reflecting investor indecision on how to weigh the wealth management strength against capital markets headwinds. The stock has gained approximately 45% over the past year, though it remains below its 52-week high of $176.55 reached earlier in January.
Analysts maintain a cautiously optimistic outlook on the shares. The consensus analyst target price stands at $182.82, representing roughly 9% upside from current levels. Of the 13 analysts covering the stock, one rates it a strong buy, three recommend buy, and nine suggest hold, with no sell ratings.
Raymond James's valuation remains attractive compared to peers. The stock trades at a trailing price-to-earnings ratio of 16.47 and a forward P/E of 14.43, slightly below the average for diversified financial services companies. The dividend yield of 1.18% provides modest income, though it trails some larger competitors.
Looking ahead, investors will focus on whether the company can sustain its wealth management momentum while navigating the choppy capital markets environment. M&A activity has shown tentative signs of revival in recent weeks, raising hopes that the worst of the investment banking slump may have passed.
The firm's focus on retail clients and independent financial advisors could prove advantageous as institutional dealmaking remains constrained. With 79% of shares held by institutional investors, Raymond James appears well-positioned to weather continued volatility while positioning for recovery when capital markets activity normalizes.
For fiscal 2026, analysts project earnings growth of roughly 8-10%, assuming gradual improvement in investment banking and continued strength in wealth management. The company's ability to maintain its dividend growth trajectory while repurchasing shares will be closely monitored as a signal of management's confidence in the business outlook.