LPL Financial (LPLA) Q3 Earnings Beat, Revenues Improve Y/Y

Zacks Equity Research
·4-min read

LPL Financial’s LPLA third-quarter 2020 adjusted earnings of $1.44 per share surpassed the Zacks Consensus Estimate of $1.25. However, the figure reflected a decline of 16% from the prior-year quarter.

Results reflect rise in revenues driven by improvement in assets and cash balances. Further, the company’s balance sheet position remained strong. However, rise in expenses and lower new assets balance were headwinds.

After taking into consideration amortization of intangible assets, net income was $103.8 million or $1.29 per share, down from $131.7 million or $1.57 per share in the year-ago quarter.

Revenues & Expenses Rise

Total net revenues were $1.46 billion, up 3% year over year. The rise was driven by higher advisory fees and other revenues. Also, the figure beat the Zacks Consensus Estimate of $1.45 billion.

Total operating expenses increased 8% year over year to $1.3 billion. All expense components increased, except for professional services costs, promotional expenses and other costs.

At the end of the third quarter, LPL Financial’s total brokerage and advisory assets were $810.4 billion, up 13% year over year.

Total net new assets were $11.1 billion at the end of the quarter, down slightly from $11.9 billion recorded at the end of the prior-year quarter. Total client cash balances jumped 49% to $46.6 billion.

Balance Sheet Position Strong

As of Sep 30, 2020, the company had total assets of $6.09 billion, up 3% from the Jun 30, 2020 level. As of the same date, cash and cash equivalents totaled $800.8 million, down 5% sequentially.

Also, total stockholders’ equity was $1.21 billion as of Sep 30, 2020, up from $1.11 billion recorded at the end of the prior quarter.

Guidance

For 2020, management continues to expect core G&A expenses in the lower end of $915-$940 million.

Our View

LPL Financial’s recruiting efforts and solid advisor productivity are likely to aid advisory revenues amid the coronavirus outbreak-induced economic uncertainty. However, persistently mounting expenses are expected to hurt the bottom line to an extent in the near term.

LPL Financial Holdings Inc. Price, Consensus and EPS Surprise

LPL Financial Holdings Inc. Price, Consensus and EPS Surprise
LPL Financial Holdings Inc. Price, Consensus and EPS Surprise

LPL Financial Holdings Inc. price-consensus-eps-surprise-chart | LPL Financial Holdings Inc. Quote

Currently, LPL Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

Performance of Other Investment Brokerage Companies

Charles Schwab’s SCHW third-quarter 2020 adjusted earnings of 51 cents per share beat the Zacks Consensus Estimate of 47 cents. However, the bottom line decreased 27% from the prior-year quarter.

Interactive Brokers Group’s IBKR third-quarter 2020 adjusted earnings per share of 53 cents were in line with the Zacks Consensus Estimate. However, the figure reflects a decline of 7% from the prior-year quarter’s earnings.

Evercore’s EVR third-quarter 2020 adjusted earnings per share were $1.11, handily beating the Zacks Consensus Estimate of 37 cents on solid underwriting fees. However, results were down 12% from the prior-year quarter’s $1.26 per share.

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