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TD Ameritrade (AMTD) Down 6.6% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for TD Ameritrade Holding CorporationAMTD . Shares have lost about 6.6% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

TD Ameritrade's Q1 Earnings Up Y/Y

TD Ameritrade reported its first-quarter fiscal 2017 (ending Dec 31) earnings of $0.41 per share, up 5% from the prior-year quarter. However, results were in line with the Zacks Consensus Estimate.

The quarter reflected higher revenues and elevated expenses. Persistent decline in NIM added to the downside. Notably, the company recorded a rise in average client trades per day, indicating trading activity improvement.

The company's net income for the quarter came in at $216 million, up 1.9% year over year.

Higher Expenses Dominate Revenues

Net revenue for the quarter came in at $859 million, lagging the Zacks Consensus Estimate of $862 million. However, net revenues increased 5.8% year over year. The rise was chiefly due to higher transaction-based as well as asset-based revenues.

Total asset-based revenues for the quarter amounted to $490 million, up 3.6% year over year, supported by higher insured deposit account fees as well as investment product fees.

Commissions and transaction fees increased 8.2% from the prior-year quarter to $355 million. However, the quarter's NIM was 1.32%, down 13 basis points year over year.

Total operating expenses climbed 7.9% year over year to $506 million. The rise was mainly stemmed by rise in a number of expenses, including employee compensation and benefits, professional services, clearing and execution costs, and other expenses.

Trading Activity Improved

Average client trades per day for the reported quarter climbed 11% year over year to 487,000.

As of Dec 31, 2016, net new client assets totaled $18.7 billion, up 6.9% year over year. Total client assets came in at $797 billion, up 15% year over year.

Average spread-based balance was $117.7 billion, jumping 14.8% year over year and average fee-based investment balance was up 7.4%, to $170.4 billion.

Balance Sheet Position

As of Dec 31, 2016, TD Ameritrade's cash and cash equivalents were $1.66 billion, compared with $1.86 billion as of Sep 30, 2015. Shareholders' equity was $5.2 billion compared with $5.1 billion as of Sep 30, 2015.

Outlook

Fiscal 2017

Average trades per day is expected in between 475,000-505,000.

Net interest margin is projected in the range of 1.27-1.38%.

The company expects EPS in the range of $1.50-$1.80.

Management's guidance for total operating expenses for the fiscal 2017 was in the range of $1.98-$2.06 billion.

Pre-tax margin is projected in the range of 38-42%.

Net new client assets are expected in the range of $55-$85 billion with annualized growth rate in between 7% to 11%.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter compared to one lower.

TD Ameritrade Holding Corporation Price and Consensus

TD Ameritrade Holding Corporation Price and Consensus | TD Ameritrade Holding Corporation Quote

VGM Scores

At this time, TD Ameritrade's stock has a poor Growth Score of 'F', however its momentum is doing a lot better with a 'A'. However, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregte VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for momentum based on our styles scores.

Outlook

Estimates have been broadly trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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