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TD Ameritrade (AMTD) Beats Q3 Earnings Estimates, Stock Up

TD Ameritrade Holding Corporation AMTD delivered a positive surprise of 7.3% in third-quarter fiscal 2017 (ending Jun 30). The company reported earnings of 44 cents per share, beating the Zacks Consensus Estimate of 41 cents. However, results were down 2% from the prior-year quarter.

Further, shares of TD Ameritrade gained 4.33% following its earnings release. The share price movement reflects investors’ positive sentiments over the improved trading activities.

Better-than-expected results reflect growth in revenues. Net interest margin (NIM) expansion was another positive. Notably, the company recorded a rise in average client trades per day, indicating improvement in trading activity. However, the positives were partially offset by elevated expenses.

The company’s net income for the quarter came in at $231 million, down 3.8% year over year.

Increased Revenues Partially Offset by Higher Expenses

Net revenue for the quarter came in at $931 million, surpassing the Zacks Consensus Estimate of $899.5 million. Moreover, net revenue increased 10% year over year. The rise was chiefly due to higher asset-based revenues, partially offset by lower transaction-based revenues.

Total asset-based revenues for the quarter amounted to $573 million. The figure increased 21.1% year over year, driven by higher insured deposit account fees, as well as investment product fees and net interest revenues.

Commissions and transaction fees declined 3.5% from the prior-year quarter to $335 million. However, the quarter's NIM was 1.55%, up 14 basis points year over year.

Total operating expenses increased 9.6% year over year to $537 million. The rise was mainly due to increase in a number of expense components, including employee compensation and benefits, professional services and occupancy and equipment costs.

Trading Activity Improves

Average client trades per day for the reported quarter increased 10.5% year over year to 510,358.

As of Jun 30, 2017, net new client assets totaled $22 billion, up 61.8% year over year. Total client assets came in at $882.4 billion, up 19.8%.

Average spread-based balance was $117.8 billion, jumping 11% year over year. Average fee-based investment balance was up 17% to $189.7 billion.

Balance Sheet Position

As of Jun 30, 2017, TD Ameritrade’s cash and cash equivalents were $2.9 billion compared with $2.2 billion as of Mar 31, 2017. Shareholders’ equity was $5.5 billion compared with $5.3 billion in the previous quarter.

Our Viewpoint

The company reported an impressive quarterly performance with significant improvement in trading activities. Further, eased margin pressure in the quarter was a major tailwind.

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. These will keep supporting its top-line growth, going forward.

TD Ameritrade Holding Corporation Price and EPS Surprise

Currently, TD Ameritrade carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of other Investment Brokers

The Charles Schwab Corp.’s SCHW second-quarter 2017 earnings of 39 cents per share were in line with the Zacks Consensus Estimate. It increased 30% from the prior-year quarter. Revenue growth, lower level of fee waivers and no provisions were among the positives.

Driven by increase in net revenue in equity securities, The Goldman Sachs Group, Inc.’s GS second-quarter 2017 results recorded a positive earnings surprise of 17.6%. The company reported earnings per share of $3.95, beating the Zacks Consensus Estimate of $3.36. Further, the bottom line witnessed 6% year-over-year improvement.

Among others, LPL Financial Holdings Inc. LPLA is expected to report second-quarter results on Jul 27.

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