LPL Financial Earnings: Results Fairly Steady, Though Industry Uncertainties Have Pressured Stock

LPL Financial’s results for the second quarter were fine, but wealth management industry uncertainties over the rates paid on client cash balances have recently pressured the share price. The company reported net income to common shareholders of $244 million, or $3.23 per diluted share, on $1.08 billion of gross profit. Gross profit increased 1% sequentially, as modest growth in transactional and client asset-based fees was offset by a decrease in client cash-related revenue. Adjusted EBITDA that excludes acquisition expenses increased 2% from the previous year and decreased 1% sequentially. We don’t anticipate making a material change to our $311 fair value estimate for narrow-moat LPL Financial and assess shares are moderately undervalued.