On Nov 13, 2013, we upgraded our long-term recommendation on
) to Outperform from Neutral based on strong third-quarter 2013
earnings. Decrease in expenses reflects the company's successful
cost reduction initiatives. Further, E*TRADE's decision to focus
on core operations and exit the market making business is
expected to improve profitability.
Though earnings per share of 16 cents were in line with the Zacks
Consensus Estimate, it improved significantly from the net loss
of 10 cents reported in the prior-year quarter. A rise in total
daily average revenue trades (DARTs) and prudent expense
management were the positives for the quarter. Moreover, decrease
in provisions and a strong capital position were the tailwinds.
However, reduced revenues remain a matter of concern.
Though volatility in equity markets has affected the level of
DARTs over the past few years, the recent rebound in equity
markets has been favorable for the company. Notably, DARTs for
the nine months ended Sep 30, 2013 nudged up 5% year over year to
147,777. Moreover, the company's aggressive focus on loss
mitigation strategies such as short sales, loan modifications and
transfers to better servicers are expected to enhance DARTs in
the coming months.
We also commend the company's efforts to ease its balance sheet
risk by reducing credit risk in its loan portfolios. Further,
cost reduction initiatives undertaken by the company are expected
to be profitable in the future.
Following impressive third-quarter 2013 results, the Zacks
Consensus Estimate over the last 30 days for 2013 increased 6.3%
to 68 cents. For 2014, the Zacks Consensus Estimate rose 7.7% to
84 cents per share, over the same time frame. Currently, E*TRADE
carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some better-performing stocks in the same sector include
Ladenburg Thalmann Financial Services Inc.
) with a Zacks Rank #1 (Strong Buy), while
Evercore Partners Inc.
Interactive Brokers Group, Inc.
) carry a Zacks Rank #2 (Buy).
E TRADE FINL CP (ETFC): Free Stock Analysis
EVERCORE PARTNR (EVR): Free Stock Analysis
INTERACTIVE BRK (IBKR): Free Stock Analysis
LADENBURG THALM (LTS): Free Stock Analysis
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