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What's in the Cards for TD Ameritrade (AMTD) in Q1 Earnings?

TD Ameritrade Holding Corporation AMTD is scheduled to report first-quarter fiscal 2018 results, after the market closes on Jan 22. Revenues and earnings are expected to grow year over year.

This Omaha-based investment broker’s fourth-quarter fiscal 2017 (ending September) earnings surpassed the Zacks Consensus Estimate and came in above the prior-year quarter figure. Results were benefited from net interest margin expansion and growth in revenues. However, the positives were partially offset by elevated expenses.

Activities of TD Ameritrade during the fiscal first quarter were inadequate to win analysts’ confidence. Thus, over the last seven days, the Zacks Consensus Estimate for the quarter’s earnings has remained stable at 51 cents. Nevertheless, it reflects a year-over-year improvement of 24.4%.

However, TD Ameritrade’s shares have underperformed the industry in the past six months. The company recorded a gain of 18.4% against the industry’s rally of 24%.

TD Ameritrade had delivered positive earnings surprises in two of the prior four quarters, with an average beat of 2.9%.

TD Ameritrade Holding Corporation Price and EPS Surprise


Earnings Whispers

According to our quantitative model, chances of TD Ameritrade beating the Zacks Consensus Estimate in this quarter are dim. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to be confident of an earnings surprise call.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The Earnings ESP for TD Ameritrade is -1.53%.

Zacks Rank: TD Ameritrade carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP. However, we also need a positive ESP to be confident of an earnings beat.

Factors to Influence Fiscal Q1 Results

Expenses likely to increase: Expenses are likely to remain under pressure, given the company’s ongoing investments in technology.  Further, absence of steady cost control measures is likely to lead to operational inefficiency.

Margin pressure might ease: With the gradually improving rate environment, margin pressure for TD Ameritrade finally seems to be easing. The company reported a rise in net interest margin (NIM) in fiscal 2017.

Exposure to Market Volatility: The company is exposed to severe market volatility. Benefiting from the volatility in markets, the company’s trading volumes have been graphing an uptrend. Further, the Zacks Consensus Estimate for the company’s average client trades per day of 667,000 reflects 26.1% sequential growth in Q1.

Revenues to grow: TD Ameritrade’s interest revenues are likely to improve on the back of higher interest rates. Notably, the Zacks Consensus Estimate for interest revenues is projected to be $247 million, up 17.6% from the prior-quarter figure. Further, transaction based revenues are also expected to grow. The consensus estimate for these revenues is $418 million, up 26.6% sequentially.

Continued asset growth: The company has been witnessing double-digit asset growth for the last several years. Notably, during fiscal 2017, the company witnessed an annualized growth rate of 10% in net new client assets, within the long-term target of increasing on an annual rate of 7-11%. With an innovative trading platform, consistent focus on high net-worth clients, and enhanced service model to boost engagement and retention, we anticipate TD Ameritrade to display the improving trend in fiscal first quarter as well.

Stocks That Warrant a Look

Here are some other stocks you may want to consider, as these have the right combination of elements to post an earnings beat this quarter.

The Earnings ESP for Legg Mason LM is +0.18% and the stock has a Zacks Rank #2. The company is scheduled to release December quarter-end results on Jan 24. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Santander Consumer USA Holdings’ SC Earnings ESP is +0.95% and it carries a Zacks Rank of 2. The company is expected to release fourth-quarter results on Jan 31.

T. Rowe Price Group, Inc. TROW is slated to release results on Jan 30. The company has an Earnings ESP of +1.49% and carries a Zacks Rank of 1.

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