Missouri-based Stifel Financial Corp. (SF), parent of Stifel Nicholas Securities, reported record fourth-quarter revenues of $228.2 million and earnings of $0.59 as compared to 2007 fourth-quarter earnings of $0.51. Consensus among analysts was for earnings of $0.58. Coming in the face of earnings stress at most other financial services firms, the Stifel report was greeted warmly by investors.
Revenues from commissions dropped substantially during the period, as did investment banking revenues, as it has become virtually impossible for companies seeking to raise capital through an initial or secondary public offering to attract investor interest.
Overall revenue at the company, however, increased by 5% year-over-year, with increased revenue from principal transactions more than offsetting the drop in commission and investment banking income.
Stifel has consistently outperformed the industry, making the firm one of the fastest growing private wealth management businesses in the country. Stifel has historically maintained one of the highest ranked research operations in the country. The company’s research staff was recently ranked number one in the industry by StarMine, the world’s largest equity research performance rating source for stock picking and for earnings accuracy.
Key ratios at Stifel are significantly better than the company’s competitors. The price/earnings ratio, for example, is 18.38 compared to the industry average of 3.61. The company’s price/sales ratio is a low 1.06, while the industry average is 6.41.
Over the last 5 years Stifel has delivered returns on assets nearly double the industry average for the period. The return on equity for the period has averaged over 12 percent, compared to 9.63 percent for the industry.
Stifel operates a bank as one of its businesses and qualified for Troubled Asset Relief Program (TARP) funds. Company Chairman and Chief Executive Officer Ron Kruszewski, however, stated in the earnings conference call that TARP funds were not accepted by Stifel as a matter of principal. Of course, it also helped that the bank owned by the company did not hold the toxic assets causing problems at other financial institutions, making it much easier to take a principled stand.
Stifel’s stock price has outpaced its competitors as well. Raymond James (RJF), Piper Jaffray (PJC), T D Ameritrade (AMTD) and Charles Schwab (SCHW) are all trading closer to their 52-week lows than is Stifel. None has reported fourth-quarter earnings approaching the results achieved at Stifel.
While the road ahead for the industry is likely to be rocky, Stifel appears to be in a favorable position to outperform the industry and the general market in 2009 and beyond.