We issued an updated research report on TD Ameritrade Holding Corporation AMTD on Jun 23, 2015. This Finance-Investment Broker stock has managed to generate year-to-date return of 7.2%, despite a dismal show on the earnings front for the first half of fiscal 2015 (ended Mar 31).
Notably, TD Ameritrade missed the Zacks Consensus Estimates in the two preceding quarters. The last quarter saw its revenues declining1.1% year over year and a 3.7% rise in operating expenses.
With no significant near-term turnaround expected in the current low interest rate environment, pressure on net interest margin (“NIM”) will continue. As a result, growth in net interest income will likely stay subdued. Management, however, is optimistic and projects NIM to trend within 1.49–1.57% for fiscal 2015 compared with 1.51% reported in the first six months of 2015. Further, net revenue for fiscal 2015 is expected to come within $3.1–$3.6 billion, signaling a year-over-year increase from $3.12 billion in fiscal 2014.
Besides, TD Ameritrade has maintained its position as a leading asset gatherer. The prior quarter saw a 12.7% year-over-year increase in total client assets to $695.3 billion, including a 33.6% rise in net new client assets; with asset-based revenues up 3.8% year over year.
However, the investment broker, which otherwise exhibits an uptrend in trading volumes, recently failed to impress with its trading metrics. Average client trades per day declined 3.1% to 476,590 in the previous quarter, and further declined 7% in May 2015 to 427,000. Any further fall can pose as a major concern.
The company continues to delight shareholders with steady dividends and share repurchases; with a 25% hike in dividends last January. Such measures are likely to win investors’ confidence in the stock. However, we believe the company can better utilize excess capital by focusing on diversifying its international operations.
On a separate note, the company partnered with leading software service provider, Solium Capital Inc., in Apr 2015, to incorporate the latter’s cloud technology into its systems, so as to provide flexible and transparent end-to-end solutions to stock plan sponsors. Steps like this will add a further competitive edge to the company.
For fiscal 2015, management anticipates expenses in a range of $410–$420 million, excluding advertising costs. On the other hand, earnings per share are expected to trend the lower end of the $1.45–$1.70 range.
Analysts, too, hold neutral views about the company’s prospects. Hence, over the past 30 days, the Zacks Consensus Estimate for fiscal 2015 has fallen marginally to $1.49 per share, while the same has remained stable at $1.84 per share for fiscal 2016.
TD Ameritrade currently carries a Zacks Rank #3 (Hold).
Stocks Worth a Look
Investors interested in the same industry space can consider better-ranked stocks like Cowen Group, Inc. COWN, The Goldman Sachs Group, Inc. GS and Morgan Stanley MS. While Cowen Group sports a Zacks Rank #1 (Strong Buy), Goldman and Morgan Stanley hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment