TD Ameritrade: Zacks’ Bear of the Day Play

TD Ameritrade (AMTDAnalyst Report) slipped to a Zacks #5 Rank Strong Sell on May 1 after a wave of downward earnings estimate revisions from analysts.

For the fiscal year 2015 ending in September, profit projections fell 5% from $1.58 to $1.50. And 2016 estimates dropped 6.6% from $1.96 to $1.83.

Triggering the wave of downward revisions was the company’s fiscal Q2 (ending March 31) earnings release where they reported EPS of 35 cents, missing the Zacks Consensus Estimate by a penny. Net income for the quarter was $189 million, down 2.6% from the prior-year quarter.

But the devil was in other details. Overall, results were hurt by lower revenues and higher expenses.

Net revenue came for the quarter came in at $803 million, missing the Zacks Consensus Estimate of $830 million. Also, net revenues declined 1.1% year over year. The decline was primarily due to lower transaction-based revenues, partially offset by higher asset-based revenues.

Total asset-based revenues for the quarter amounted to $439 million, up 3.8% year over year, while commissions and transaction fees decreased 6.4% from the prior-year quarter to $350 million.

Total operating expense rose 3.7% year over year to $507 million. The increase was mainly due to a rise in costs related to employee compensation and benefits, clearing and execution, communications and professional services, partially offset by advertising expenses.

And average client trades per day declined 3.1% year over year to 476,590.

Here is how the analyst estimate revisions have evolved over the past 90 days according to the Zacks EPS summary tables…

Until this earnings trend turns around, staying on the sidelines with AMTD might be the safe bet. The Zacks Rank will let you know.

Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money portfolio.

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