On Apr 6, Wells Fargo and Co. (WFC) and Raymond James Financial Inc. (RJF) reportedly reached a private settlement, thereby mending issues in a brokerage raiding case that was going on since 2007. Accordingly, the arbitration panel of Financial Industry Regulatory Authority (FINRA) has imposed a penalty of $12 million on Raymond James.
The matter caught fire when 20 advisors of AG Edwards, managing assets worth $725 million, were improperly poached by Raymond James when the former was taken over by Wachovia in 2007. However, this issue came under the radar when Wachovia was acquired by Wells Fargo in 2008. Wells Fargo then noticed that the apparently some lost business was due to the loss of advisors from the AG Edwards acquisition. Hence Raymond James was accused of inappropriate appointment of these advisors.
Although Raymond James tried to open the case by filing a claim in Feb 2010 and accusing Wells Fargo of keeping back certain documents, this was not entertained by the court and the company was found liable to the damages incurred by the merged Wells Fargo Wachovia group.
As a result, Raymond James has been charged by $10.5 million in compensatory damages and $1.5 million in legal fees to be paid to the Wells Fargo Advisors.
Estimate Trend Revision
Over the last 30 days, two of the 22 analysts covering Wells Fargo stock have lowered their estimates for the first quarter of 2010, while four upward revisions were witnessed. Currently, the Zacks Consensus Estimate for first quarter is operating earnings of 41 cents per share, which would be down by 30.3% from the year-ago quarter.
The higher number of upward estimate revisions for the first quarter indicates a likelihood of upward pressure on the performance of the stock in the near term.
With respect to earnings surprises, the stock has been steady over the last four quarters, with all positive surprises. The average remained positive at 52.3%. This implies that Wells Fargo has surpassed the Zacks Consensus Estimate by 52.3% over that period.
The upside potential for the estimate for the first quarter, essentially a proxy for future earnings surprises, currently stands at 12.2%.
Read the full analyst report on “WFC”
Read the full analyst report on “RJF”
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