It has been about a month since the last earnings report for TD Ameritrade Holding Corporation AMTD. 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%.