Ameritrade Earnings Preview: What We Will Be Watching

TD Ameritrade (NASDAQ: AMTD) is scheduled to announce its fiscal fourth quarter earnings on Tuesday, October 24. Interest earning assets, which generate about 50% of the company’s revenues, grew nearly 5% in the year-to-date period ending August. The rate hikes over the past year, driven by improvements in U.S. GDP and employment rates, led to a massive surge in assets. We believe the growth momentum spilled over into September as well. We expect over 20% growth in revenues for this segment in 2017, and believe that the fiscal fourth quarter growth will be along similar lines.

The earnings could be impacted by the company’s decision to slash its commission per trade in February. Following the price cuts by rivals such as Charles Schwab and Fidelity in order to stay competitive with zero-commission brokerages, the company slashed its commission per trade from $9.99 to $6.95. Since Ameritrade generates over 40% of its revenue from trading commissions, we expect a decline in trading revenue. However, the brokerage’s trading volumes for the first 2 months of the quarter grew by over 15% in comparison to the prior year comparable period, which we believe is due to the improvement in U.S. macro conditions and increased volatility in the stock market. This will partially offset the decline in trading revenue.

See our complete analysis for Ameritrade.

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