LPL Financial (LPLA) Q4 Earnings Beat Despite High Expenses

LPL Financial’s (NASDAQ:LPLA) fourth-quarter 2019 adjusted earnings of $1.68 per share surpassed the Zacks Consensus Estimate of $1.62. The figure reflects an increase of 13% from the prior-year quarter.

Revenue growth, and an increase in total brokerage and advisory assets aided results. However, higher expenses acted as a headwind.

After taking into consideration non-recurring items, net income was $126.7 million, increasing 5% year over year.

For 2019, adjusted earnings of $7.17 per share surpassed the Zacks Consensus Estimate of $7.12. The figure reflects an increase of 35% from the previous year. Net income was $559.9 million, increasing 27% year over year.

Revenues Improve, Expenses Rise

Total quarterly net revenues were $1.45 billion, up 10% year over year. The rise was supported by an increase in almost all revenue components, except for transaction and fee income; and interest income, net of interest expenses. The reported figure marginally surpassed the Zacks Consensus Estimate of $1.44 billion.

For 2019, total net revenues were $5.62 billion, up 8% year over year. The figure surpassed the Zacks Consensus Estimate of $5.56 billion.

Total quarterly operating expenses increased 11% year over year to $1.25 billion. All expense components increased, except for professional services costs; brokerage, clearing and exchange-related costs; and other costs.

At the end of the fourth quarter, LPL Financial’s total brokerage and advisory assets were $764.4 billion, up 22% year over year.

Total net new assets were $8.8 billion at the end of the quarter, up from $5.9 billion recorded at the end of the prior-year quarter. Total client cash balances decreased 3% year over year to $33.7 billion.

Balance Sheet Position

As of Dec 31, 2019, the company had total assets of $5.88 billion, up 7% from the Dec 31, 2018 level. As of the same date, cash and cash equivalents totaled $590.2 million, up from $511.1 million as of Dec 31, 2018.

Also, total stockholders’ equity was $1.02 billion as of Dec 31, 2019, up from $974.1 million recorded as of Dec 31, 2018.

Share Repurchase Update

LPL Financial repurchased $120 million worth of shares during the quarter.

Guidance

For 2020, management expects core G&A expenses of $915-$940 million.

Our Viewpoint

LPL Financial delivered a decent performance in the fourth quarter. The company’s recruiting efforts and solid advisor productivity will likely continue to aid revenues. Moreover, its inorganic growth efforts (including the acquisition of Allen & Company) look impressive and will likely aid the top line.

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

Performance & Earnings Release Date of Other Companies

BlackRock, Inc.’s (NYSE:BLK) fourth-quarter 2019 adjusted earnings of $8.34 per share surpassed the Zacks Consensus Estimate of $7.67. Moreover, the figure was 37.2% higher than the year-ago quarter’s number.

Cohen & Steers’ (NYSE:CNS) fourth-quarter 2019 adjusted earnings of 74 cents per share surpassed the Zacks Consensus Estimate of 67 cents. Also, the bottom line was 32.1% higher than the year-ago quarter figure.

Affiliated Managers Group, Inc. (NYSE:AMG) is slated to announce results on Feb 3.

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