In this article, we will discuss: 10 Best Financial Services Stocks To Buy According to Analysts.
According to the Financial Industry Index, which increased by more than 30% by mid-December and beat the overall market by about 5 percentage points, 2024 was a spectacular year for the financial industry. This growth followed concerns about mid-sized bank collapses in early 2024, which proved to be isolated incidents rather than an issue impacting the industry as a whole.
Meanwhile, as we have mentioned in our article, 10 Best Financial Stocks To Buy According to Hedge Funds, the market for financial services has expanded significantly in the last several years and is further expected to grow at a compound annual growth rate (CAGR) of 7.7% in the next few years.
Amidst the growth, as per EY’s report, the financial services industry is also undergoing a change because of artificial intelligence, particularly generative AI, which boosts productivity, modifications, and innovation. AI is helping banks provide individual solutions and improve risk control while accelerating processes like fraud detection, loan processing, and customer support. Large financial institutions are using AI to lower expenses, improve compliance, and create new products like automated tax compliance and predictive analytics. Nonetheless, issues like data privacy, rules of conduct, and AI’s “black box” decision-making continue to exist. Notwithstanding these obstacles, artificial intelligence is revolutionizing financial services by spreading beyond banking to include wealth management, insurance, and payments.
According to IBM’s report 2024, Generative AI is revolutionizing financial services by improving customer satisfaction and propelling advancements in risk assessment as well as personalized financial solutions. Secondly, the use of hybrid clouds is growing as companies seek to boost compliance, scalability, and efficiency. Thirdly, cybersecurity is still crucial, with growing investment in fraud detection systems as AI-driven threats emerge. Businesses are putting a greater spotlight on sustainability by giving green financial products and ESG initiatives top priority. By utilizing AI technologies such as Watsonx Assistant, customer experience management (CXM) increases customer pleasure and loyalty. Moreover, the use of open banking is growing as a result of APIs’ ability to simplify procedures and provide customers with more control over their data. Secure online transactions are being reinforced by the resurgence of digital currencies and blockchain.
Looking ahead, Deloitte’s 2025 investment management outlook predicts that AI, digital transformation, and changing investor demands will quickly impact the investment management industry in 2025. Low-cost funds are dominant, with active management flourishing within ETFs. Sustainability-focused investments, hybrid funds, and private financing are important growth areas. AI has exceeded expectations and is transforming operations and sales, but companies that are not embracing it quickly could fall behind. Regulatory changes, cybersecurity, and the combination of traditional and alternative assets are examples of growing risks. While some companies may find it difficult to survive in a high-risk, high-reward environment, bold companies that use AI and diversify their products may benefit from these changes. The key to success is scaling innovation and satisfying the need for sustainable, affordable solutions.
On the other hand, Deloitte’s 2025 banking and capital markets outlook report stated that banks can strengthen their basis for sustainable growth with creativity and discipline as the banking industry adjusts to a low-growth, lower-rate environment. It is anticipated that GDP growth will be 1.5% in 2025, and inflation will be approaching the 2% target, presenting a low-growth, lower-rate scenario for US banks. With savings exhausted by March 2024 and debt reaching $17.7 trillion, consumer spending may decline. Net interest margins may be compressed as a result of declining interest rates, with the federal funds rate falling to 350-375 basis points. Noninterest income presents opportunities, but growing salaries and technology expenditures drive up costs. Credit quality may slightly improve but is expected to stabilize. As geopolitical and regulatory uncertainty further complicate the picture, Deloitte observes that weak business investment and higher deposit costs will test banks’ adaptability.
With that said, here are the 10 Best Financial Services Stocks To Buy According to Analysts.
Methodology:
We sifted through holdings of financial ETFs and online rankings to form an initial list of 20 financial services stocks. From the resultant dataset, we chose 10 stocks with a projected upside potential of over 7% based on analyst price targets, as of January 9. The stocks are ranked according to their upside potential. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
10. Marsh & McLennan Companies Inc. (NYSE:MMC)
Upside Potential as of January 9: 7.17%
The professional services company and one of the Best Financial Stocks, Marsh & McLennan Companies Inc. (NYSE: MMC), offers guidance and solutions in the fields of strategy, risk, and human resources. The company is divided into two primary business segments: risk and insurance services and consultancy. The company provides risk and insurance services through Guy Carpenter, a risk and reinsurance specialist, and Marsh, an insurance broker. Oliver Wyman, a management and economic consultancy, and Mercer, a human resource services company, comprise the consulting section. It makes around half of its revenue outside of the United States.
Following a strong 10% rise in the previous year, Marsh & McLennan Companies Inc. (NYSE:MMC) announced 5% YoY underlying revenue growth in Q3 2024. The company’s segment highlights included 7% YoY growth in Marsh and Guy Carpenter, 5% YoY growth in Mercer, and 1% growth in Oliver Wyman. The adjusted operating margin expanded by 110 basis points, which helped to support the 12% growth in adjusted operating income. The $7.75 billion deal the business made to acquire McGriff Insurance Services is anticipated to be slightly accretive to adjusted EPS in its initial year and significantly accretive in the following years. The firm has committed around $10 billion to acquisitions in 2024, making it the company’s highest M&A year ever.
Going forward, Marsh & McLennan Companies Inc. (NYSE:MMC) expects strong adjusted EPS growth for the entire year, additional margin expansion, and mid-single-digit or better underlying revenue growth.
Jimmy Bhullar, an analyst at JPMorgan, increased the price objective for Marsh & McLennan Companies Inc. (NYSE:MMC) from $230 to $235. Going into 2025, the analyst is still optimistic about business trends in the property and casualty industry and believes that the group will perform better because of its defensive risk profile and consistent firm pricing. In a research note, the analyst warned investors that current valuations, high sentiment, and optimistic earnings expectations “make the upside in stocks less compelling than a year ago.” Due to a positive view of margins, the company is most optimistic about personal lines stocks by segment.
Ian Simm’s Impax Asset Management was the largest stakeholder in the company among the funds in Insider Monkey’s database at the end of Q3 2024. It owns 1.81 million shares worth $403.20 million as of Q3.
9. Chubb Limited (NYSE:CB)
Upside Potential as of January 9: 7.93%
Warren Buffett’s 2023 investment in Chubb Limited (NYSE:CB), a leading insurance company with operations in 54 countries, brought attention to the company and demonstrated its immense popularity. The company’s global footprint guarantees resilience against localized risks by providing various insurance products and obtaining more than half of its premiums from the United States. Buffett’s investment displays his faith in the business’s strong operations and competitive position.
Chubb Limited (NYSE:CB) is one of the few businesses with a global presence big enough to cater to multinationals. Its network has made it difficult for any rivals to enter the market.
One of the Best Financial Stocks, Chubb Limited (NYSE:CB), delivered outstanding core operating EPS growth of 15.5% in the most recent quarter, driven by a 14.3% increase in core operating income to $2.3 billion. The year’s net and operating income increased by 16.9% and 13.8%, respectively, to set new earnings records. At $1.5 billion, P&C underwriting income increased 11.5%, resulting in a combined ratio of 87.7. While the life insurance business surpassed forecasts with $284 million in profits and premiums up 21% in constant dollars, adjusted net investment income increased 15.9% to $1.6 billion. Life premiums grew 10.6%, while P&C premium revenue grew 7.6% globally, or 8.5% in constant currencies. Globally, Asia Pacific had the highest premium growth rate (9.2%), followed by Europe (7.5%) and Latin America (7%).
The firm reported an operating cash flow of $4.55 billion in Q3 of 2024, and its operating cash flow for the previous twelve months was $14.8 billion. For 31 years in a row, the company has been able to increase dividends due to its strong cash position.
Warren Buffett’s Berkshire Hathaway was the largest stakeholder in the company among the funds in Insider Monkey’s database at the end of Q3 2024. It owns 27.03 million shares worth $7.80 billion as of Q3.
The London Company made the following comment about Chubb Limited (NYSE:CB) in its Q3 2024 investor letter:
Initiated: Chubb Limited (NYSE:CB) – CB engages in the provision of commercial and personal property and casualty insurance, personal accident and health (A&H), reinsurance, and life insurance. While the company is headquartered outside the U.S., roughly 2/3 of its profits are generated in the U.S. with Asian markets representing another 20% of earnings. CB has a portfolio of top-performing, multibillion-dollar businesses that have substantial scale and yet potential for growth. CB has a culture of superior underwriting discipline, and management has a strong track record of expense control. CB also has a well-balanced mix of business by customer and product, with extensive distribution channels. We are attracted to CB’s globally diversified business model, superior underwriting and expense management, consistent and best-in-class profitability, upside potential from growth in Asia, and the potential to benefit from higher interest rates in its investment portfolio.
8. Citigroup Inc. (NYSE:C)
Upside Potential as of January 9: 9.10%
Citigroup Inc. (NYSE:C), one of the Best Financial Stocks, is a global financial services company that operates in over 100 different countries and territories. The company’s operations are divided into five primary categories: US personal banking, markets, wealth management, banking, and services. The bank’s primary services include US credit card services, trade and investment banking, and cross-border banking requirements for multinational companies.
Citigroup Inc. (NYSE:C) operates a domestic retail banking division as well as an international commercial banking franchise. Large trading, investment banking, international corporate banking, and custody operations are all part of the bank’s commercial operations, which are divided into services, markets, and banking segments (previously known as Institutional Client Group or ICG). The company’s most distinctive business, considering its global presence, is its commercial banking segment. This global reach will help maintain its position as a favored bank for multinational firms. Despite these advantages, maintaining a global presence is expensive and challenging, and the bank’s markets division makes a small profit. As a result, the commercial banking industry has experienced several benefits.
As part of its strategic repositioning, Citigroup Inc. (NYSE:C) is selling off its consumer business in Mexico and reinvesting in wealth and commercial banking, among other significant actions. The company might at last become a franchise with structural improvements.
With the exception of divestitures, the company’s overall revenues increased by 3% in the third quarter of 2024 as each of its major segments enjoyed growth and improved operating leverage. Higher loan and deposit volumes, along with a significant fee increase, drove the Services segment’s 8% revenue gain, setting a new quarterly record. Significant progress was also made in wealth management, as evidenced by a 24% increase in client investment assets and a 9% rise in revenues. At Citigold North America, adviser productivity increased by over 50% YoY. Investment banking fees increased 44% year over year due to the issuance of investment-grade debt and strong advising performance. In addition, the company maintained a good CET1 capital ratio of 13.7% while returning $2.1 billion in capital, including $1 billion in share repurchases.
Warren Buffett’s Berkshire Hathaway was the largest stakeholder in the company among the funds in Insider Monkey’s database at the end of Q3 2024. It owns 55.24 million shares worth $3.46 billion as of Q3.
7. Mastercard Incorporated (NYSE:MA)
Upside Potential as of January 9: 9.83%
As the second-largest payment processor in the world, Mastercard Incorporated (NYSE:MA), one of the Best Financial Stocks, handled almost $9 trillion in transactions in 2023. The company thrives at digital and cross-border payments, maintains strong operating margins, and gains from more travel. The company operates in more than 200 countries and handles transactions in more than 150 currencies.
Despite market challenges and inflation, the company continues to show robust growth and profitability. Mastercard Incorporated (NYSE:MA) is poised for future growth because of its strategic and innovative investments, despite the risks of competition and regulatory scrutiny.
The sustainability of Mastercard Incorporated (NYSE:MA) is seen in its most recent financial outcomes. Revenue increased 13% year over year in Q3 of 2024 due to strong consumer spending and improved global macroeconomic conditions. Travel-related and overall spending is still growing, as seen by the 10% YoY growth in gross dollar volume and the 17% YoY increase in cross-border volumes. Operating margins rose to 59.3%, which led to a 16% increase in EPS, while revenue from value-added services grew by 18%, surpassing overall growth. The company’s $12 billion authorization for a new share buyback and its $12 billion yearly free cash flow prove that it continues to deliver outstanding returns to shareholders. Cash flow from operations grew by 58.86% year over year.
Trevor Williams, a Jefferies analyst, maintained his Buy recommendation on Mastercard Incorporated (NYSE:MA) shares and increased the price objective from $590 to $610. Investors are informed by the analyst that, based on the firm’s assessment of the underlying drivers in FY25, no more pricing would be required in 2025 for the company to achieve 12% growth in organic transaction processing fees, and just 50 points of additional pricing would be required to achieve 13% growth.
The 24 analysts with 12-month price targets for Mastercard Incorporated (NYSE:MA) stock have an average target of $567.17, with a low estimate of $482 and a high estimate of $654. The current stock price of $516.40 is expected to rise 9.83%, according to the average objective.
Ken Griffin’s Citadel Investment Group was the largest stakeholder in the firm among the funds in Insider Monkey’s database. It owns 4.12 million shares worth $2.03 billion as of Q3. Qualivian Investment Partners stated the following regarding Mastercard Incorporated (NYSE:MA) in its Q3 2024 investor letter:
“Mastercard Incorporated (NYSE:MA): Q2 2024 revenues and EPS beat consensus expectations, growing 11% (+13% on a constant currency, CC, basis) and 24% (+27% on a CC basis) respectively. Overall payments volume increased 9%, with highly profitable cross-border volumes growing 17%. Management qualified their expectations for a solid FY2024 anchored around continued stable consumer spending, while noting there is uncertainty regarding the overall macroeconomic backdrop heading into the back half of 2024 and 2025. In the event of a weakening consumer, management noted they would adjust investment priorities as well as the company’s cost structure as appropriate if trends softened further. We continue to expect that over the longer term, MA will continue to drive and benefit from the digitization of payments globally.”
6. Berkshire Hathaway Inc. (NYSE:BRK.B)
Upside Potential as of January 9: 10.22%
Berkshire Hathaway Inc. (NYSE:BRK.B), a holding company that is among the Best Financial Stocks, has multiple separate subsidiaries that engage in a range of operations. Geico, Berkshire Hathaway Primary Group, and Berkshire Hathaway Reinsurance Group are primarily responsible for the company’s insurance business. The surplus funds from these and other businesses have been used by Berkshire over the years to purchase the railroad Burlington Northern Santa Fe, the utility and energy distributor Berkshire Hathaway Energy, and the companies that make up its manufacturing, service, and retailing businesses, including five of its largest noninsurance pretax earnings generators: Precision Castparts, Lubrizol, Clayton Homes, Marmon, and IMC/ISCAR. The conglomerate stands out due to its completely decentralized operations. The business ended 2024 with a gain of over 23.0%.
In Q3 2024, Berkshire Hathaway Inc. (NYSE:BRK.B) reported strong net earnings growth, reaching $26.3 billion, compared to a loss of $12.8 billion in Q3 2023, driven by notable $16.2 billion in investment gains. Insurance investment income increased 48% year over year to $3.7 billion, supporting operating profitability, which stayed strong at $10.1 billion. The insurance float increased by $5 billion to $174 billion, and the $2.9 billion share repurchase displays effective capital management.
Growth at Berkshire Hathaway Energy and BNSF further improved the results. Berkshire Hathaway Energy reported a 227% increase in earnings in Q3 2024, reaching $1.63 billion from $498 million in Q3 2023. Earnings for BNSF increased 13% year over year to $1.38 billion from $1.22 billion in Q3 2023.
Estimates for Berkshire Hathaway Inc. (NYSE:BRK.B) shares range from $465 to $531, with a 12-month average price objective of $498. The average target suggests a 10.22% increase from the current price of $451.84.
5. The Charles Schwab Corporation (NYSE:SCHW)
Upside Potential as of January 9: 11.96%
One of the Best Financial Stocks, The Charles Schwab Corporation (NYSE:SCHW), a savings and loan holding company, was established in 1986 and offers a range of services, including banking, asset management, wealth management, custody, and financial advising. Investor Services and Advisor Services are its two main business segments.
The Charles Schwab Corporation (NYSE:SCHW) became the biggest retail broker in the US by client assets after acquiring TD Ameritrade, which strengthened its offerings for individual investors and improved trading. As of the end of July, Schwab’s total customer assets stood at $9.57 trillion, a growth driven by the increase in new assets. This translates to a 2% monthly rise and a 16% annual increase. Among the monthly accomplishments were 327,000 new brokerage accounts and $29 billion in core net new assets.
The Charles Schwab Corporation (NYSE:SCHW) produced strong third-quarter results, with net revenues rising 5% year over year to $4.8 billion, fueled by market performance and ongoing investor engagement. The company’s total client assets reached a record $9.92 trillion, up 27% year on year, thanks to solid asset acquisition and equity market resilience. The quarter’s core net new assets came to $95.3 billion, increasing the year-to-date total to $252.1 billion, a 10% increase over 2023. The adjusted diluted earnings per share were stable at $0.77, while the adjusted net income was $1.5 billion. Trading revenue rose 4% year over year, while adjusted pre-tax profit margins improved to 41.2%. Along with continuing to cut back on supplemental funding, Schwab also reported sequential growth in client transactional sweep cash balances, reaching $384 billion. These outcomes highlight Schwab’s solid operating momentum and careful financial management.
The Charles Schwab Corporation (NYSE:SCHW)’s strong market position and development potential have led analysts to award the company a Buy recommendation. The average price objective indicates a possible gain of 11.96% from the current stock price of $73.00.
Natixis Global Asset Management’s Harris Associates was the largest stakeholder in the company among the funds in Insider Monkey’s database. It owns 28.23 million shares worth $1.83 billion as of Q3.
RiverPark Large Growth Fund stated the following regarding The Charles Schwab Corporation (NYSE:SCHW) in its Q3 2024 investor letter:
“The Charles Schwab Corporation (NYSE:SCHW): SCHW was a top detractor in the third quarter following an uneven second quarter earnings report. After two quarters of stabilization of client deposits and continued reduction of short-term high-cost funding, both metrics reversed in the second quarter causing the company to lower near term EPS expectations. Client deposit accounts, though no longer materially impacted by cash sorting (clients moving cash to higher yielding instruments), declined more than expected as clients used this cash to pay taxes. Lower than expected deposits in turn limited SCHW’s ability to continue to pay down higher cost funding sources ultimately leading to lower spread income. While near term EPS expectations were lowered, we believe that 1) higher spreads should still materialize even if delayed and 2) client assets in the aggregate continue to grow at a healthy pace driven by market gains and organic growth.
Schwab has been the leading share gainer in the discount brokerage industry over the last decade, generating substantial organic asset growth while also growing operating margins and remaining amongst the price leader on all products. Revenue should continue to accelerate in the coming quarters as lower interest-bearing assets mature, which will allow the company to pay back higher cost short-term funding and invest at higher prevailing rates. We believe the company has emerged from the mini bank crisis of 2023 in an even stronger position to gather assets and drive long-term margins and free cash flow in the years to come.”
4. The Progressive Corporation (NYSE:PGR)
Upside Potential as of January 9: 12.41%
One of the largest auto insurers in the US, Progressive Corporation (NYSE:PGR) offers specialized lines in addition to private and commercial auto insurance. It currently has over 20 million personal auto policies in effect. The business sells its products directly to consumers via the phone, online, and through independent insurance brokers in the US and Canada. Its premiums are almost evenly split between the agent and direct channels. Through an acquisition in 2015, the company branched out into homeowners insurance and now offers commercial auto products.
The Progressive Corporation (NYSE:PGR), one of the best financial stocks and one of the most successful franchises in the insurance business has consistently generated returns that are at the top of the market. However, the business has seen a great deal of volatility as a result of the recent fluctuations in the auto insurance market.
The Progressive Corporation (NYSE:PGR) had a strong third quarter, with revenue of $19.46 billion, a 27% year-over-year increase, and GAAP EPS of $3.97, $0.08 more than anticipated. The company’s combined ratio of 89% revealed profitability because it paid out less in claims and expenses than it made in premiums. The firm added a record 1.6 million new policies due to significant media investment and strong demand. Strong growth in both direct and agency channels was the result of record-high direct channel applications and improved customer conversions, positioning the company for sustained gains in market share.
JPMorgan increased its price target on The Progressive Corporation (NYSE:PGR) from $251 to $256. Going into 2025, the analyst is still optimistic about business trends in the property and casualty industry and believes that the group will perform better because of its defensive risk profile and consistent firm pricing. In a research note, the analyst warned investors that current valuations, high sentiment, and optimistic earnings expectations “make the upside in stocks less compelling than a year ago.” Due to a favorable perception of margins, the company is most optimistic about personal lines stocks by segment.
Thomas Bancroft’s Makaira Partners was the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 603,603 shares worth $153.17 million as of Q3.
Bretton Fund stated the following regarding The Progressive Corporation (NYSE:PGR) in its Q3 2024 investor letter:
“We think The Progressive Corporation (NYSE:PGR) is the most sophisticated auto insurer in the business. It leverages its vast amount of driver data and is usually one of the first in the industry to recognize important shifts in things like driver behavior and collision costs. Progressive was one of the first to raise rates aggressively in 2021 to offset the higher costs from the more frequent car crashes and higher repair costs post-Covid. By raising prices before its competitors did, Progressive lost customers and wasn’t able to grow as fast as it usually does. The rest of the industry has since caught up and increased rates. Progressive’s rates are now comparatively attractive once again, and that’s led to highly profitable growth. Through September 30, its premiums are up 20% over last year, which is great for a low-growth industry like auto insurance. Progressive added 1.5% to the fund this quarter.”
3. S&P Global Inc. (NYSE:SPGI)
Upside Potential as of January 9: 17.74%
S&P Global Inc. (NYSE:SPGI) provides statistics and benchmarks to participants in the capital and commodity markets. Its ratings division is the largest credit rating company in the world and S&P’s largest segment in terms of profitability. The main revenue section of S&P is market intelligence, which primarily serves the financial services industry with desktop, data, and advisory solutions, enterprise solutions, and credit/risk solutions. The company’s other divisions include commodity insights (Platts and other data), mobility (Carfax), and indexes.
S&P Global Inc. (NYSE:SPGI) has also recently introduced ChatAI and incorporated generative AI as part of its emphasis on technical innovation. Through strategic moves like the acquisition of Visible Alpha and PrimeOne, the company has also strengthened its key strengths and expanded its portfolio. Since the start of 2024, the stock has increased by almost 14%, placing it among the Best Financial Stocks.
For the third quarter of 2024, S&P Global Inc. (NYSE:SPGI) reported sales of $3.6 billion, a 16% increase over the same period the year before. The company’s data and analytics section generates steady cash flow, which is another advantage of its ratings business. The company’s operating cash flow has increased significantly from $2.4 billion during the same period last year to over $4 billion as of right now. S&P Global Inc. (NYSE:SPGI) has raised dividends for 52 years in a row.
Aristotle Atlantic Partners, LLC highlighted S&P Global Inc. (NYSE:SPGI)’s strong performance in its Q3 2024 investor letter. Here is what the firm has to say:
“S&P Global Inc. (NYSE:SPGI) contributed to portfolio performance in the third quarter, driven by growth in corporate bond issuance and refinancing activity, with expectations for further acceleration if interest rates decline. The company has also achieved better-than-expected expense and revenue synergies from its acquisition of IHS Markit.”
Morgan Stanley increased its price target for S&P Global Inc. (NYSE:SPGI) from $570 to $595 on December 12, 2024. The company claims that it favors stocks in the business and education services markets, where it anticipates faster growth that is not yet represented in valuation, due to the possibility of better consumer credit and recovering capital markets in 2025.
Chris Hohn’s TCI Fund Management was the largest stakeholder in the company among the funds in Insider Monkey’s database at the end of Q3 2024. It owns 10.40 million shares worth $5.37 billion as of Q3.
2. Intercontinental Exchange Inc. (NYSE:ICE)
Upside Potential as of January 9: 19.44%
Intercontinental Exchange, Inc. (NYSE:ICE), one of the Best Financial Stocks, provides supplemental data products and manages vertically integrated financial exchanges. The company runs a significant derivatives exchange, but its most widely recognized asset is the New York Stock Exchange, which it purchased in 2013. The company’s biggest commodity futures offering is the ICE Brent crude futures contract. In addition to its exchanges business, which contributes to about 54% of net revenue, Intercontinental Exchange has acquired a number of companies to develop its mortgage technology business (22% of net revenue) and fixed-income and data services division (24% of net revenue).
Intercontinental Exchange, Inc. (NYSE:ICE) revealed record transaction revenues of $1.1 billion and record recurring revenues of $1.2 billion in Q3 2024, which helped the company’s net sales reach a new high of $2.3 billion, up 17.27% year over year. A record high of $1.55 was also achieved by adjusted earnings per share, while adjusted pro forma operating income climbed by 12% annually to a record $1.4 billion. The Exchange division’s net sales, which rose 12% year over year to a record $1.3 billion, highlight its outstanding performance. Transaction revenues for this segment increased by 17% to $890 million, mostly due to a 23% increase in energy revenues and a 34% increase in interest rate business.
The Fixed Income and Data Services segment experienced a considerable increase, with record revenues of $586 million. The segment’s recurring revenues increased by 6% from the prior year to a record $461 million. Growth in the index business was roughly 30% year over year. Additionally, Intercontinental Exchange, Inc. (NYSE:ICE) made significant progress in debt reduction, wiping out almost $600 million in outstanding debt during the quarter and ending with an adjusted leverage ratio of about 3.5 times EBITDA.
Aristotle Core Equity Strategy stated the following regarding Intercontinental Exchange, Inc. (NYSE:ICE) in its Q3 2024 investor letter:
“Intercontinental Exchange, Inc. (NYSE:ICE) contributed to portfolio performance in the third quarter, driven by continued strength in the company’s Exchanges segment and expectations that the Mortgage Technology segment’s revenues have troughed ahead of an eventual recovery in U.S. housing market activity. Exchanges’ revenues continue to be driven by growth in energy and interest rate futures trading volumes, with energy trading activity expected to remain elevated, primarily bolstered by increasing data center-driven electricity demand.”
Natixis Global Asset Management’s Harris Associates was the largest stakeholder in the company among the funds in Insider Monkey’s database at the end of Q3 2024. It owns 13.29 million shares worth $2.14 billion as of Q3.
1. Royal Bank of Canada (NYSE:RY)
Upside Potential as of January 9: 28.63%
The Royal Bank of Canada (NYSE:RY) is one of the six banks that hold roughly 90% of all bank deposits in Canada and is one of the two biggest banks in terms of assets. The United States makes up the majority of the bank’s remaining revenue, with Canada contributing two-thirds. It has done an outstanding job of expanding its nonbank business, efficiently running its banking activities, and generating some of the highest returns for stockholders in the industry.
Royal Bank of Canada (NYSE:RY) offers a variety of financial services, including corporate banking, wealth management, insurance, capital markets, and personal and commercial banking. The bank is mostly focused on Canada, although it also operates in the US and other countries. RBC’s global wealth management and capital market reach generate an extensive revenue stream.
For the fourth quarter of 2024, Royal Bank of Canada (NYSE:RY) reported earnings of $4.2 billion, with adjusted earnings rising 18% year over year to $4.4 billion. Its Wealth Management division achieved a significant milestone when global assets under administration topped $2 trillion for the first time, and Canadian wealth management AUA grew by 26% over the same period last year. The acquisition of HSBC Canada resulted in run-rate savings of over $400 million and increased quarterly earnings by $265 million. Furthermore, the bank reported record revenue in Corporate Investment Banking and Global Markets during the fourth quarter, and its pre-provision pretax earnings rose 14% year over year.
Royal Bank of Canada (NYSE:RY)’s quarterly dividend increased by $0.06, or 4%, reflecting its solid performance. It is a leading bank stock in terms of growing dividends. Over the last ten years, the bank has been able to raise payouts despite market crises and the pandemic.
Argus affirmed its Buy rating on Royal Bank of Canada (NYSE:RY) shares and increased their price target from $132 to $140. In a research note, the analyst informed investors that the company is still competitive, with a solid wealth management franchise and a growing market share in Canadian banking. Argus further stated that the $400 million run-rate annualized savings with HSBC Bank Canada, which was purchased in March 2024, is on target to reach the $740 million total by March 2026.
Rajiv Jain’s GQG Partners was the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 5.75 million shares worth $717.89 million as of Q3.
Overall, Royal Bank of Canada (NYSE:RY) ranks first on our list of the 10 Best Financial Services Stocks To Buy According to Analysts. While we acknowledge the potential for RY to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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