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Shares of TD Ameritrade Holding Corporation (AMTD - Analyst Report) 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 income.

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 headwinds.  

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 figure.

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 headwind.

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.

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 (TD - Snapshot Report) 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 pressure.

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. (RJF - Analyst Report) and Evercore Partners Inc. (EVR - Snapshot Report).

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