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TD Ameritrade Upped to Strong Buy

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On Sep 14, Zacks Investment Research upgraded TD Ameritrade Holding Corporation (AMTD - Free Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

TD Ameritrade has been witnessing rising earnings estimates following the announcement of robust fiscal third-quarter 2013 earnings. Moreover, this brokerage firm has delivered positive earnings surprises in 3 of the last 4 quarters, with an average beat of 7.7%.

TD Ameritrade reported fiscal 2013 results on Jul 23. Earnings per share of 33 cents surpassed the Zacks Consensus Estimate by 2 cents. Results benefited from higher revenues. Further, an increase in both total client assets and daily average client trades were the positives. However, a rise in expenses was the headwind.

Net revenue rose 9% year over year to $725 million. Average client trades per day increased 12% year over year to 399,216. Net new client assets were $10.8 billion, up 11% from $9.7 billion in the past year.

At the end of the quarter, TD Ameritrade reported total client assets worth $523.5 billion, up 18% year over year. Moreover, average spread-based balance was $84.7 billion, up 14% from $74.2 billion in the prior-year quarter. Average fee-based balance was $118.1 billion, up 34% year over year.

Net interest revenue was $120.0 million, up 2% year over year. Operating income climbed 17% year over year to $298 million. On the other hand, total operating expense rose 3% year over year to $427.0 million.

Additionally, the company reported a rise in average client trades from the prior year in its Activity Report for Aug 2013. For the reported month, average client trades were 382,000, up 26% year over year. Further, U.S. trades increased 2% from the prior-month level. The rise in client trades largely resulted from a resurgence in the equity markets.

Additionally, following the earnings release, the Zacks Consensus Estimate for 2013 increased 6.2% to $1.20 per share over the last 60 days. For 2014, the Zacks Consensus Estimate increased 5.6% to $1.32 per share over the same time frame.

Positive earnings surprises and favorable estimate revisions stimulated the rank upgrade.

Other Stocks to Consider

While we prefer TD Ameritrade, other stocks with a Zacks Rank #1 include German American Bancorp Inc. (GABC - Free Report) , First Interstate Bancsystem Inc. (FIBK - Free Report) and Firstbank Corporation .

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