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Will Rising DARTs Support E*TRADE (ETFC) in Q4 Earnings?

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E*TRADE Financial Corporation (ETFC - Free Report) is scheduled to report fourth quarter and 2017 results on Jan 25. The company is expected to witness year-over-year growth in revenues and earnings.

The stock is currently enjoying investors’ attention and has been breaching its 52-week highs for quite some time.

E*TRADE has robust organic growth prospects, and its inorganic growth efforts during the quarter are expected to keep driving the stock. Notably, the Zacks Consensus Estimate for the to-be-reported quarter earnings of 62 cents indicates a 44.2% year-over-year improvement.

Before we discuss why an earnings beat might be in store, let’s take a look at how the company performed in the prior quarter.

In the last reported quarter, E*TRADE reported a positive earnings surprise of 7.8%, supported by increased net revenues and benefit from provisions. Further, the quarter witnessed an increase in daily average revenue trades (DARTs) along with growth in customer accounts. However, the positives were partially offset by higher expenses.

E*TRADE delivered positive earnings surprises in each of the trailing four quarters, with an average beat of 10.4%.

The stock has gained 32.6% over the past six months, outperforming the industry’s rally of nearly 24%.

E*TRADE Financial Corporation Price and EPS Surprise

Why a Likely Positive Surprise?

Our quantitative model does predict a beat. Here’s why:

E*TRADE has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.

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 E*TRADE is +0.70%.

Zacks Rank: E*TRADE sports a Zacks Rank #1 (Strong Buy).

Also, activities of E*TRADE during the quarter were adequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the to-be-reported quarter has been revised 5.1% upward over the last 30 days.
Factors That Might Influence Q4 Results

DARTs Might Improve: Owing to the stock market rally during the quarter in response to progress in terms of the tax reform, trading activities remained strong. This is likely to benefit the New York-based e-broker’s revenues.

Expenses Might Escalate: The company’s expenses are expected to climb due to its higher marketing activities and costs related to the Options House acquisition.

Revenues Likely to Improve: Continued momentum in investment banking business and easing margin pressure are likely to support E*TRADE’s top line. Also, rise in net brokerage accounts is likely to boost its revenues. The Zacks Consensus Estimate for these accounts is 30,000, a sequential increase of 14.4%.

Notably, the Zacks Consensus Estimate for sales is $633.1 million, up 24.4% year over year.

Other Stocks That Warrant a Look

Here are some other stocks worth considering, as they have the right combination of elements to post an earnings beat this quarter.

Federated Investors’ (FII - Free Report) Earnings ESP is +0.86% and it sports a Zacks Rank of 1. The company is expected to release fourth-quarter and 2017 results on Jan 25. You can see the complete list of today’s Zacks #1 Rank stocks here.

T. Rowe Price Group (TROW - Free Report) has an Earnings ESP of +1.49% and carries a Zacks Rank #2 (Buy). It is scheduled to report results on Jan 30.

Apollo Global Management, LLC (APO - Free Report) is slated to report results on Feb 1. It has an Earnings ESP of +4.30% and carries a Zacks Rank of 2.

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