TD Ameritrade Earnings Meet Expectations, Shares Down - Analyst Blog
TD Ameritrade Holding Corporation AMTD fiscal 2015 third-quarter (ending Jun 30) earnings per share of 36 cents came in line with the Zacks Consensus Estimate. Notably, the bottom line compared favorably with the prior-year quarter earnings of 34 cents.
TD Ameritrade Holding Corporation - Earnings Surprise | FindTheBest
Shares of TD Ameritrade fell more than 1% at the close of Tuesday’s trading session. Perhaps the price reaction reflects investors’ concern about the company’s continuous rise in expenses.
Results reflected revenue growth driven by higher transaction-based revenues and asset-based revenues, offset by a rise in expenses. The quarter witnessed improved average client trades, record client assets and continued rise in average fee based investment balances.
TD Ameritrade’s net income for the quarter was $197 million, up 3.7% from the prior-year quarter.
Performance in Detail
Net revenue came for the quarter came in at $794 million, almost in line with the Zacks Consensus Estimate. Further, net revenues increased 4.1% year over year.
Total asset-based revenues for the quarter amounted to $450 million, up 4.7% year over year. Commissions and transaction fees increased 3.5% from the prior-year quarter to $328 million.
Net interest margin was 1.51%, decreasing 1 basis point from the prior-year quarter.
Total operating expense rose 4.9% year over year to $469 million. The increase was mainly due to a rise in costs related to employee compensation and benefits, advertising and communications, partially offset by lower depreciation and amortization costs.
Average client trades per day increased 8% year over year to 433,759. Though, net new client assets totaled $11.7 billion, down 12.7% year over year, total client assets increased up 8% year over year to $702.3 billion.
Moreover, average spread-based balance was $95.3 billion, increasing 4.5% year over year, while average fee-based investment balance increased 16.5% to $161.3 billion.
Balance Sheet
As of Jun 30, 2015, TD Ameritrade’s cash and cash equivalents were $2.2 billion, compared with $1.5 billion as of Sep 30, 2014. Shareholders’ equity was $5.0 billion, compared with $4.7 billion as of Sep 30, 2014
Share Repurchase
During the third quarter of fiscal 2015, TD Ameritrade repurchased 125,000 shares at an average price of $36.75 per share.
Our Viewpoint
Innovations in online trading, long-term investment in products and services, delivery of advanced customer service, and creative marketing and sales are some of TD Ameritrade’s key strategies for boosting its trading and investing business.
Amid a volatile operating environment, the company witnessed a continuous rise in organic client assets, which bode well, going forward. However, we remain cautious regarding a continuous rise in expenses, a low interest rate environment and stringent regulations, which may weigh on the company’s financials in the upcoming quarters.
At present, TD Ameritrade carries a Zacks Rank #3 (Hold).
Performance of Other Investment Brokers
Interactive Brokers Group, Inc. IBKR reported second-quarter 2015 adjusted earnings per share of 37 cents, which outpaced the Zacks Consensus Estimate of 32 cents. Also, earnings came in 42% above the year-ago quarter figure.
The Charles Schwab Corp.’s SCHW second-quarter 2015 earnings of 25 cents per share surpassed the Zacks Consensus Estimate by a penny. The bottom line was up 9% from the year-ago quarter.
Among others, E*TRADE Financial Corporation ETFC is slated to report results on Jul 23.
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