What Happened
Piper Sandler Companies (PIPR -1.59%) surged in May as its stock price increased 14.6% in the month, according to data provided by S&P Global Market Intelligence.
The investment bank bested the benchmarks, as the S&P 500 was essentially flat in May, up 0.2%, while the Nasdaq Composite was down 1.9%. Despite the bounce, Piper Sandler is still down 29% year to date.
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So what
The Minneapolis-based investment bank got a nice bump last month with the April 29 release of its first-quarter earnings report, which easily beat estimates. Adjusted earnings per share, which excludes acquisition costs and other nonrecurring items, was $3.12 per share, beating estimates of $2.80 per share, while revenue was $353 million, down 18% year over year but beating estimates.
Advisory services accounted for most of the revenue, up 38% to $211 million in the quarter. It was the strongest first quarter ever for this segment as Piper Sandler advised on four of the five largest U.S. bank and thrift merger deals. Also, its institutional brokerage business generated $105 million in revenue, down 4% year over year but up 13% from the previous quarter. These gains were offset by the deep drop in revenue in corporate financing, which fell 83% to $19 million. This drop is reflective of a slowdown overall due to market volatility, declining valuations, and economic and geopolitical concerns.
Also, the market reacted favorably to the news that the company will repurchase up to $150 million of company stock through Dec. 31, 2024. This is in addition to the existing share repurchase program, effective on Jan. 1, 2022, which still has $43 million left of stock to repurchase by the end of 2023.
Now what
There are a couple of things to consider for Piper Sandler over the next few quarters. One, the firm beefed up its restructuring team with the hiring of a new managing director, Mike Genereux, in its New York office. The move reflects expected growth in restructuring deals for the firm as more companies look for ways to navigate this market.
The company also sees pent-up demand for corporate financing, particularly in the healthcare sector, over the coming quarters as that market reemerges from this period of uncertainty. Of course, when that is remains to be seen, as recession remains a concern and geopolitical risk continues.
