E*TRADE Financial Corp Earnings: Two Straight Quarters of Profit Broken by a Loss

The Cheat Sheet

S&P 500 component E*TRADE Financial Corporation reported its results for the fourth quarter. E*TRADE Financial provides online brokerage and related products and services primarily to individual retail investors.

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E*TRADE Financial Earnings Cheat Sheet for the Fourth Quarter

Results: Loss narrowed to $6.3 million (loss of 2 cents per diluted share) from $24.1 million (loss of 11 cents per share) in the same quarter a year earlier.

Revenue: Noninterest income was $185.8 million last quarter.

Actual vs. Wall St. Expectations: ETFC fell short of the mean analyst estimate of 20 cents per share. It fell short of the average revenue estimate of $488.9 million.

Quoting Management: “While there were unique items impacting our results in the quarter, our return to full year profitability in 2011, for the first time in five years, marks significant progress for the company,” said Steven Freiberg, Chief Executive Officer of E*TRADE Financial. “Despite the systemic burdens of an unfavorable macro-economic environment, a regulatory transition, and certain well-publicized events in 2011 – our brokerage business generated nearly twice the net new accounts, with healthy growth in both net new assets and DARTs compared to 2010. Furthermore, we continue to de-risk and strengthen the franchise, with an ever-shrinking credit overhang and significantly improved capital levels over last year. As we enter the new year, we are confident in our capacity to manage through current macro-economic challenges, and even more optimistic in our ability to capitalize on future improvements in market and economic conditions. Over the coming months, we have several platform enhancements, new products and services scheduled to launch, providing us a high level of confidence in the continued strength of our franchise.”

Key Stats:

The company’s loss in the latest quarter follows profits in the previous three quarters. The company reported a profit of $70.7 million in the third quarter, a profit of $47.1 million in the second quarter and $45.2 million in the first.

The company fell short of estimates last quarter after beating the mark the quarter before with net income of 24 cents versus a mean estimate of net income of 19 cents per share.

Looking Forward: Over the past ninety days, the average estimate for the first quarter of the next fiscal year has fallen from 16 cents per share to 14 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. Over the past three months, the average estimate for the fiscal year has climbed from 65 cents per to share to 69 cents.

Competitors to Watch: TD Ameritrade Holding Corp. , The Charles Schwab Corp. , optionsXpress Hldgs., Inc. , Interactive Brokers Group, Inc. , Morgan Stanley , FXCM Inc , Gain Capital Holdings Inc , TradeStation Group, Inc. , SWS Group, Inc. , and Raymond James Financial, Inc. .

Stock Performance: Shares of ETFC were down 2% from the previous close.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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