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TD Ameritrade (AMTD) Q4 Earnings Beat Estimates, Stock Up

TD Ameritrade Holding Corporation AMTD delivered a positive surprise of 6.5% in fourth-quarter fiscal 2017 (ending Sep 30). The company reported earnings of 49 cents per share, beating the Zacks Consensus Estimate of 46 cents. Further, results were up 29% from the prior-year quarter.

Also, fiscal 2017 earnings came in at $1.84 per share, up 10% higher year over year.

Shares of TD Ameritrade gained 3.9% following its earnings release. The share price movement reflects investors’ positive sentiments over improved trading activities.

The 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 $211 million, down 8.7% year over year. Its fiscal 2017 net income came in at $872 million, comparing favorably with the year-ago figure of $842 million.

Increased Revenues Partially Offset by Higher Expenses

Net revenues for the quarter came in at $983 million, surpassing the Zacks Consensus Estimate of $965 million. Moreover, net revenues increased 18.6% year over year. The rise was chiefly due to higher asset-based revenues, partially offset by lower transaction-based revenues.

Also, its fiscal 2017 net revenues came in at $3,676 million, of which 60% was mainly asset-based revenues. The reported figure was 10.5% higher year over year.

Total asset-based revenues for the quarter amounted to $632 million. The figure increased 31.9% 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 1.8% from the prior-year quarter to $330 million. However, the quarter's NIM was 1.66%, up 31 basis points year over year.

Total operating expenses increased 13.9% year over year to $622 million. The rise was mainly due to an 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 19% year over year to 527,741.

As of Sep 30, 2017, net new client assets totaled $20 billion, up 31.8% year over year. Total client assets came in at $1,118.5 billion, up 44.6%.

Average spread-based balance was $121.7 billion, jumping 9.7% year over year. Average fee-based investment balance was up 18.2% to $199.8 billion.

Balance Sheet Position

As of Sep 30, 2017, TD Ameritrade’s cash and cash equivalents were $1.5 billion compared with $1.9 billion as of Sep 30, 2016. Shareholders’ equity was $7.2 billion compared with $5.1 billion as of Sep 30, 2016.

Our Viewpoint

The company came up with an impressive performance on a significant improvement in trading activities. Further, eased margin pressure in the quarter acted as a tailwind. The company recorded a rise in average client trades per day in the fiscal third and fourth quarters. Also, its deal to acquire Scottrade is likely to be accretive to earnings per share. TD Ameritrade’s steady capital deployment activities and revenue growth are encouraging.

However, we remain cautious of elevated costs, which are likely to weigh on the company’s financials.

TD Ameritrade Holding Corporation Price, Consensus 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 third-quarter 2017 earnings of 42 cents per share were a penny above the Zacks Consensus Estimate. Also, earnings increased 20% from the prior-year quarter. Revenue growth, lower level of fee waivers and no provisions were among the positives.

Reflecting top-line strength, The Goldman Sachs Group, Inc.’s GS third-quarter 2017 results led to a positive earnings surprise of 16.5%. The company reported earnings per share of $5.02, comfortably beating the Zacks Consensus Estimate of $4.31. Further, the bottom line witnessed 3% year-over-year improvement.

LPL Financial Holdings Inc. LPLA is expected to report third-quarter results on Oct 26.

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The Charles Schwab Corporation (SCHW): Free Stock Analysis Report
 
Goldman Sachs Group, Inc. (The) (GS): Free Stock Analysis Report
 
TD Ameritrade Holding Corporation (AMTD): Free Stock Analysis Report
 
LPL Financial Holdings Inc. (LPLA): Free Stock Analysis Report
 
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