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TD Ameritrade Upped to Strong Buy

Zacks Equity Research

On Sep 14, Zacks Investment Research upgraded TD Ameritrade Holding Corporation (AMTD) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

TD Ameritrade has been witnessing rising earnings estimates following the announcement of robust fiscal third-quarter 2013 earnings. Moreover, this brokerage firm has delivered positive earnings surprises in 3 of the last 4 quarters, with an average beat of 7.7%.

TD Ameritrade reported fiscal 2013 results on Jul 23. Earnings per share of 33 cents surpassed the Zacks Consensus Estimate by 2 cents. Results benefited from higher revenues. Further, an increase in both total client assets and daily average client trades were the positives. However, a rise in expenses was the headwind.

Net revenue rose 9% year over year to $725 million. Average client trades per day increased 12% year over year to 399,216. Net new client assets were $10.8 billion, up 11% from $9.7 billion in the past year.

At the end of the quarter, TD Ameritrade reported total client assets worth $523.5 billion, up 18% year over year. Moreover, average spread-based balance was $84.7 billion, up 14% from $74.2 billion in the prior-year quarter. Average fee-based balance was $118.1 billion, up 34% year over year.

Net interest revenue was $120.0 million, up 2% year over year. Operating income climbed 17% year over year to $298 million. On the other hand, total operating expense rose 3% year over year to $427.0 million.

Additionally, the company reported a rise in average client trades from the prior year in its Activity Report for Aug 2013. For the reported month, average client trades were 382,000, up 26% year over year. Further, U.S. trades increased 2% from the prior-month level. The rise in client trades largely resulted from a resurgence in the equity markets.

Additionally, following the earnings release, the Zacks Consensus Estimate for 2013 increased 6.2% to $1.20 per share over the last 60 days. For 2014, the Zacks Consensus Estimate increased 5.6% to $1.32 per share over the same time frame.

Positive earnings surprises and favorable estimate revisions stimulated the rank upgrade.

Other Stocks to Consider

While we prefer TD Ameritrade, other stocks with a Zacks Rank #1 include German American Bancorp Inc. (GABC), First Interstate Bancsystem Inc. (FIBK) and Firstbank Corporation (FBMI).

Read the Full Research Report on AMTDRead the Full Research Report on FIBKRead the Full Research Report on GABCRead the Full Research Report on FBMIZacks Investment Research