A month has gone by since the last earnings report for TD Ameritrade (AMTD - Free Report) . Shares have added about 6.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is TD Ameritrade due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
TD Ameritrade Q4 Earnings Top on Strong Trading Activity
TD Ameritrade delivered a positive earnings surprise of 8.2% in fourth-quarter fiscal 2019 (ending Sep 30). Adjusted earnings of $1.05 per share surpassed the Zacks Consensus Estimate of 97 cents. The figure also jumped 14.1% from the prior-year quarter’s reported tally.
The company’s results displayed stellar revenues and escalating expenses in the fiscal fourth quarter. Rise in NIM was also recorded. Notably, the company witnessed an increase in average client trades per day, indicating investors’ willingness to invest, leading to higher trading activity.
Including certain non-recurring items, net income for the quarter came in at $551 million or $1.00 per share compared with the $454 million or 80 cents reported in the prior-year quarter.
For fiscal 2019, adjusted net income came in at $2.3 billion or $4.13 per share compared with the $1.9 billion or $3.34 recorded in fiscal 2018. Including certain non-recurring items, net income came in at $2.2 billion or $3.96 per share compared with the $1.5 billion or $2.59 reported in fiscal 2018.
Rise in Revenues Partly Offset by Higher Expenses
For fiscal 2019, the company reported revenues of $6 billion, up 9.1% year over year. Furthermore, the revenue figure surpassed the Zacks Consensus Estimate of $5.9 billion.
Net revenues for the reported quarter came in at $1.56 billion, up 11.4% year over year. This upside can chiefly be attributed to higher asset-based and transaction-based revenues. The reported figure outpaced the Zacks Consensus Estimate of $1.47 billion as well.
Total asset-based revenues for the September-end quarter amounted to $1 billion, up 12.9% year over year, driven by higher bank deposit account fees, investment product fees and net interest revenues.
Further, commissions and transaction fees jumped 4.1% from the prior-year quarter to $502 million. The quarter's NIM came in at 2.27%, expanding 22 basis points year over year.
Total operating expenses flared up 2% year over year to $778 million. This upswing mainly resulted from rise in almost all components of expenses, partly mitigated by lower occupancy and equipment costs, along with communication and other expenses.
Steady Trading Activity
Average client trades per day for the fiscal fourth quarter increased 5.3% year over year to 837,009. For fiscal 2019, average client trades per day were 862,158, up 6.3% year over year.
As of Sep 30, 2019, net new client assets totaled $22 billion, up 7% year over year on annualized basis. Total client assets came in at $1.33 trillion, up 2.3% year over year.
Average spread-based balance was $146.8 billion, up 2.9% year over year, and average fee-based investment balance was down 1.7%, to $267.1 billion.
Balance Sheet Position
As of Sep 30, 2019, TD Ameritrade’s cash and cash equivalents were $2.85 billion, up from the $2.69 billion reported as of Sep 30, 2018. Shareholders’ equity was $8.7 billion compared with $8 billion as of Sep 30, 2018.
During the fiscal fourth quarter, TD Ameritrade repurchased 5.8 million shares for a total cost of $295 million and an additional 30 million shares for repurchases was authorized by the board.
Fiscal 2020 Outlook
The company expects to deliver revenues in the range of $4.9-$5.3 billion.
GAAP operating expenses are expected to be in the range of $2.8-$3 billion.
Advertising expense is expected to be in $250-$300 million band and intangible amortization is expected to be $115-$120 million.
Tax rate is expected to be between 24% and 26%.
Shareholder return of around 90% of non-GAAP net income is anticipated.
Net new assets are expected to be within the 7-10% range. Share repurchases are expected to be around $15 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
At this time, TD Ameritrade has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
TD Ameritrade has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.