LPL Financial Earnings: Gross Profit Grows From Asset-Based Fees, While Client Cash Revenue Flat

LPL Financial was able to increase profit in the first quarter due to higher client asset levels and asset-based fees, but client cash-related revenue is flat. The company reported net income to common shareholders of $289 million, or $3.83 per diluted share, on $1.07 billion of gross profit. Gross profit increased 6% sequentially, as growth in client assets to $1.44 trillion drove 10% growth in advisory and commissions and 9% growth in other asset-based revenue. However, client cash-related revenue of $373 million was 15% lower than a year ago and flat sequentially. We don’t anticipate making a material change to our $311 fair value estimate for narrow-moat-rated LPL Financial and assess shares are fairly valued to slightly undervalued.