E*Trade Earnings Surprise, Company Beats on Top and Bottom Line

Updated on

E*Trade Earnings Surprise, Company Beats on Top and Bottom Line

On Thursday after the bell, E TRADE Financial Corporation (NASDAQ:EFTC)  announed its first quarter earnings report.

Analysts have estimated $0.09 cents earnings per share as compared to the previous year’s $0.16 cents per share. In the last month, estimates have increased from $0.08 cents but it still comes in below the $.14 cents estimate in January, according to Forbes.

In addition, revenue estimates are looking at a 26.7 percent decline year-over-year to $455.1 million for the first quarter as compared to last year’s $620.5 million. Revenue has been estimated at $1.82 billion for the year.

Keep Your Eye on Possible Loss Trend

Investors may want to keep an eye on E-Trade’s fourth quarter loss that broke a three-quarter earnings profit streak. Will this be the start of a new loss trend for the company?

In the fourth quarter, E TRADE Financial Corporation (NASDAQ:ETFC) saw a $6.3 million loss but before then the third quarter produced a $70.7 million profit; the second quarter saw a $47.1 million profit and in the first quarter of the last fiscal year, there was a $45.2 million profit.

Looking at revenue figures from the previous four quarters, it has dropped a 2.9 percent average when compared year-over-year. The largest drop took place in the fourth quarter with a 8.2 percent revenue decline from the previous year’s quarter.

For now, most analysts have a “Hold” rating on E-Trade. This has been a firm stance for the last three months. Last week, Goldman Sachs started coverage on the stock and gave it a “Neutral” rating.

E-Trade’s Competition

As a financial services company, E*TRADE Financial supports the retail investor in online brokerage and products and services. It also provides trading products and services such as the automated order placement and execution of orders for stocks, futures, ETFs and bonds.

The company’s competitors include TD Ameritrade Holding Corp. (NASDAQ:AMTD) , The Charles Schwab Corporation (NYSE:SCHW) , and  Interactive Brokers Group, Inc. (NASDAQ:IBKR) . Another competitor,  Morgan Stanley (NYSE:MS) , reported its earnings on Thursday. It incurred a first quarter loss but it beat estimates.

In this competitive arena–discount online brokerage–consolidation among firms is expected to continue.

After the results were released, the numbers contradicted our bearish sentiments. The company reported net income of $63 million, or $0.22 per share including a tax benefit of $26 million or $0.09 per share. This compares with a net loss of $6 million, or $0.02 loss per share in the prior quarter, and net income of $45 million, or $0.16 per share in the first quarter of 2011. The Company reported total net revenue of $489 million for the first quarter, compared with $475 million in the prior quarter and $537 million in the year-ago period.

“We started the year off with a solid first quarter, reflecting good momentum in the core brokerage business, and continued improvement in our legacy loan portfolio,” said Steven Freiberg, Chief Executive Officer of E*TRADE Financial. “Achieving firm records in net new brokerage assets and account retention are a testament to our ongoing efforts in sales and service, while trading activity benefited from market-wide reengagement of the retail investor during the quarter. Meanwhile, we continued to improve our risk profile as our legacy loan portfolio declined in size and risk — now accounting for less than a quarter of the firm’s assets with total special mention delinquencies down 20 percent sequentially, and down 26 percent year over year.”

The shares closed up 1.27% in the post market after the better than expected results.

Leave a Comment