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TD Ameritrade Stock Lower on Earnings

By: , dated July 18th, 2012

Shares of TD Ameritrade Holding Corporation (AMTD: Charts, News) closed down -0.13 or -0.79 percent on Tuesday to $16.27 per share after the company announced its net income had dropped by 2.3 percent due to slower trading activity in the third quarter.
The company has seen its volume of client trades decline as concerns of a weaker economy and dwindling volume kept traders on the sidelines. TD Ameritrade’s average trading volume so far this month dropped to 319,000 per day, according to CEO Fred Tomczyk in a conference call with analysts.

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Omaha, Nebraska based TD Ameritrade Holding Corporation was founded in 1971 and has become a major discount broker through its many acquisitions. One of its more recent takeovers was for thinkorswim.com, which it bought for over $600 million in 2009, expanding its online presence in the options markets.

Ameritrade reported a profit of $153.8 million for the quarter ending on June 30th, or $0.28 per share, versus a profit of $157.4 million or $0.27 per share in the same period one year ago. Revenue declined by three percent to $667.3 million from $684.8 million in the same period last year.

According to a poll of analysts surveyed by Thomson Reuters (TRI: Charts, News), the company was expected to earn $0.26 per share on revenue of $661 million. The better than expected bottom line was largely attributed to the company cutting expenses and more assets being deposited by Ameritrade customers.

Despite the better than expected per share profit, TD Ameritrade said its commission and transaction fee revenue had declined by -5.5 percent from the second quarter and -9.0 percent from the first. On the conference call to analysts, CEO Tomczyk said that the activity rate, or the amount of client trades divided by funded accounts had dropped to 6.5 percent year to date, its lowest level since 2007.

During the conference call, CEO Tomczyk stated that, “As job growth well appears to be slowing, Europe seems to go from crisis to crisis with no permanent solution in place and we’re now seeing some slowing in China, in India. We can’t predict how any of these issues will be resolved, but if this summer is anything like last summer or the summer before, it will likely take some kind of an event or asked by our leaders to bring investors back into the market.”

Referring to Ameritrade’s growth in customer assets, which increased by nine percent to $9.7 billion, “We continue to execute our game plan and perform to the best of our ability in those areas within our control. In the early aforementioned growth, we continue to gather assets at an industry leading pace.”

Many analysts forecast Ameritrade’s fourth quarter profit to be $0.25 to $0.27 per share, but with an increase in market activity leading up to the 2012 election, TD Ameritrade, along with other online brokers may see business pick up.

Other News About AMTD
TD Ameritrade Institutional Draws Breakaway Brokers at Record Pace
Ameritrade attracts institutional brokers.
TD Ameritrade founder’s politics upset some
Controversy surrounding conservative company founder Joe Ricketts.

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Jay Hawk Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

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