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Toronto-Dominion (TD) Surges 5.9%: Is This an Indication of Further Gains?

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Toronto-Dominion Bank (TD - Free Report) shares soared 5.9% in the last trading session to close at $59.23. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 0.2% gain over the past four weeks.

The impact of the ten interest rate hikes since last year (announced by the Central Bank to control inflation) can be seen now from the slowdown in economic growth in Canada. Also, the Canadian economy added fewer jobs than expected in October and the jobless rate rose to a 21-month high. This might result in the Central Bank not raising rates any further, which will be a positive for banks in Canada. Thus, investor optimism over the pause in rates is likely to have driven the TD stock higher in the last five consecutive trading days.

This retail and wholesale bank is expected to post quarterly earnings of $1.43 per share in its upcoming report, which represents a year-over-year change of -12.8%. Revenues are expected to be $9.27 billion, down 20.7% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Toronto-Dominion, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on TD going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Toronto-Dominion belongs to the Zacks Banks - Foreign industry. Another stock from the same industry, Bank of Nova Scotia (BNS - Free Report) , closed the last trading session 6.2% higher at $43.30. Over the past month, BNS has returned -1.5%.

For Bank of Nova Scotia, the consensus EPS estimate for the upcoming report has remained unchanged over the past month at $1.28. This represents a change of -17.4% from what the company reported a year ago. Bank of Nova Scotia currently has a Zacks Rank of #3 (Hold).

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