On Sep 24, 2013, we reiterated our long-term recommendation on
) at Neutral. Our decision rests on the company's improved total
daily average revenue trades (DARTs) as well as increased
revenues. However, increased provisions and higher operating
expenses are the causes of concern.
After reporting earnings growth in first-quarter 2013, E*TRADE
continued with its strong performance in the second quarter.
Aided by loan portfolio contractions, improved credit quality and
a strong capital position, the company reported earnings per
share of 21 cents. Results handily beat the Zacks Consensus
Though E*TRADE's DARTs were affected by the volatility in equity
markets last year, recent market trends have been favorable for
the company. Moreover, E*TRADE's focus on loss mitigation
strategies - such as short sales, loan modifications and
transfers to better servicers - are expected to further improve
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.
However, the current low interest rate environment will likely
keep E*TRADE's net interest spread and net interest income under
pressure. Further, we are concerned about the recent regulatory
upheavals, which will affect E*TRADE's capital and business over
the long term.
The Zacks Consensus Estimate over the last 60 days for 2013
remained stable at 63 cents. For 2014, the Zacks Consensus
Estimate rose 4% to 76 cents per share. Hence, E*TRADE currently
carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some better-performing stocks in the same sector include
BGC Partners, Inc.
KCG Holdings, Inc.
Interactive Brokers Group, Inc.
). All of these have a Zacks Rank #2 (Buy).
BGC PARTNRS INC (BGCP): Free Stock Analysis
E TRADE FINL CP (ETFC): Free Stock Analysis
INTERACTIVE BRK (IBKR): Free Stock Analysis
KCG HOLDINGS (KCG): Free Stock Analysis
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