Bull of the Day: E Trade Financial

With the surge in stock market last year, retail investors are getting back into trading, resulting in record trading volumes for online brokerages.

About the Company

Headquartered in New York, E*TRADE Financial Corporation (ETFC) provides online brokerage and related products and services to individual investors and stock plan participants.

The Company provides these services to customers both online and through their network of customer service representatives and financial consultants. The company also operates a bank for deposits generated through its brokerage business.

ETFC was incorporated in 1982 and had its IPO in 1996.

Excellent Fourth Quarter Earnings

On January 23, E*TRADE reported its fourth quarter results. Net income for the quarter was $0.20 per share, in- line with the Zacks Consensus Estimate. Results were a significant improvement over net loss of $0.65 per share in the prior-year quarter.

Daily average revenue trades (DARTs) for the quarter were 160,000-- highest in over two years. Average margin loan balance was five-year high at $6.4 billion, up 8% sequentially and 10% year-over-year.

ETFC got 22,000 net new brokerage accounts during the quarter, taking the total to 95,000 added during the full year. Annual attrition fell to a record low 8.8% in 2013.

Bank and consolidated Tier 1 leverage ratios were 9.5% and 6.7% as of the end of fourth quarter.

Positive Earnings Estimates Revisions

After excellent results, analysts have raised their estimates for the company. Zacks Consensus Estimates for the current and next year are now $0.91 and $1.16 per share up from $0.87 and $1.08 per share respectively, 60 days ago.

Rising estimates sent ETFC to a Zacks Rank #1 (Strong Buy) last week.

Solid Industry Outlook

Zacks industry rank for “Investment Brokers” is currently 34 out of 265 (top 13%).

The Bottom Line

ETFC is a Zacks Rank#1 (Strong Buy) stock. Further top Zacks Industry Rank also indicates strong chances of outperformance in the short- to medium- term.

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