) have recorded a year-to-date return of 81%. Impressive asset
growth, strong capital deployment activities of the company and
high client trades per day acted were the driving factors.
However, we are not confident that these positives will translate
to further strength down the road, as there will be considerable
pressure on its bottom line owing to pressure on net interest
After analyzing the company's fundamentals following the
third-quarter 2013 earnings release, our suggestion is to keep
its shares in your portfolio. However, adding more shares
of TD Ameritrade may not be a good idea due to the prevalent
Why this Stance?
TD Ameritrade's fiscal fourth-quarter 2013 adjusted earnings came
in at 36 cents per share, marginally beating the Zacks Consensus
Estimate. Further, this was up 38% from the year-ago quarter
Better-than-expected results came on the back of increased
revenues. Further, rise in total client assets and daily average
client trades were positives. However, higher expenses were a
With a strong financial position and solid cash flow, TD
Ameritrade enjoys flexibility in returning capital to
shareholders and investing for future growth. In Oct 2013, the
company declared a 33% hike in its quarterly dividend and a
special dividend of $0.50 per share.
Notably, the company also announced a special dividend of the
same amount in Dec 2012. Given its solid capital position, we
expect such deployment activities to continue and further enhance
investors' confidence in the stock.
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Additionally, we are encouraged by the company's healthy asset
growing capabilities and higher trading volumes amid a sluggish
macroeconomic environment. Also, the company's association with
The Toronto-Dominion Bank
) increases chances of expanding its footprint by opening
brokerage offices within many of the bank's current branches.
This is expected to be significant growth driver going forward.
However, the company's top line growth is expected to be under
pressure in the near term. The current low interest rate
environment is expected to weigh on the company's expansion and
net interest income. Even though interest rates are rising,
global macroeconomic uncertainty is keeping many retail investors
away from the market. The real estate sector is also under
When it comes to estimate revision, the company has witnessed a
mixed movement. The Zacks Consensus Estimate has not been in
trend either. Hence, TD Ameritrade currently has a Zacks Rank #3
(Hold). Over the last 30 days, the Zacks Consensus Estimate for
2013 moved up 2% to $1.34 per share. However, for 2014, it moved
downfell 1% to $1.62 per share.
Other Stocks to Consider
If you are interested in the investment brokerage sector, you
could consider Zacks Rank #2 (Buy) stocks like
Raymond James Financial, Inc.
Evercore Partners Inc.