Online brokerage firm E*TRADE Financial Corp. (NASDAQ: ETFC) will report its fourth quarter earnings on January 26, 2011. In the last three quarters of FY 2010, E*TRADE's reported EPS exceeded analysts' consensus estimates in the quarters ended March 2010 and June 2010, by margin of 16.70 percent. For the quarter ended September 2010, E*TRADE's reported EPS met analysts' consensus estimate of $0.03 per share.
The financial services company provides online brokerage and related products and services to the individual retail investors, under the brand E*TRADE Financial. It also offers retail banking services, such as checking and savings accounts and CD accounts. The company's subsidiaries include E*TRADE Bank, a federally chartered savings bank that provides investor-focused banking products to retail customers nationwide and deposit accounts insured by the Federal Deposit Insurance Corporation (FDIC); The company operates in two business segments: Trading and Investing, and Balance Sheet Management.
Q3 results met analysts' consensus
For the third quarter of FY 2010, E*TRADE reported net revenues of $489 million, down from $534 million sequentially and $575 million in the third quarter of FY 2009. The company's third quarter FY 2010, net income was $8 million, or $0.03 per share, down from net income of $35 million, or $0.12 per share, but an increase from a net loss of $855 million, or $6.74 loss per share in the third quarter FY 2009. The company ended the quarter with $159 billion in total customer assets, compared with $146 billion in the same quarter last fiscal.
E*Trade Financial faces strong competition, most importantly from Charles Schwab Corp. (NASDAQ: SCHW), TD Ameritrade Holding Corporation (NASDAQ: AMTD). E*Trade and TD Ameritrade are very similar in structure: they both run a no-frills investing platform geared towards self-guided investors. In the last one year, TD Ameritrade reported earnings of $1 per share, on revenues of $2.52 billion. Charles Schwab reported earnings of $0.42 per share, on revenues of $2.53 billion. On the other hand, E*TRADE reported a loss of $0.33 per share on revenues of $2.53 billion.
The P/S ratio of the company is at 1.45, compared to industry's 1.80. The quarterly revenue growth rate of E*TRADE is 85.80 percent, compared to industry's quarterly revenue growth of 15.30 percent.
Wall Street expects strong performance, after third quarter results
For the fourth quarter ending December 31, 2010, analysts' EPS estimates range from a low of $0.01 to a high of $0.07 per share, compared to the consensus estimate of $0.04 or year ago same quarter loss of $0.40 per share. Analysts' revenue estimates for the fourth quarter range from a low of $296.50 million to a high of $336.60 million, compared to a consensus estimate of $322.94 million or $231.04 million posted in the same quarter a year ago. For the quarter ended December 31, 2010, the consensus EPS forecast has been downgraded to the current estimate of $0.04 per share, from $0.07 estimated 60 days ago.
On April 18, 2007, the company's board of directors authorized a $250.0 million common stock repurchase program. In 2007, the company repurchased a total of 7.2 million shares of common stock for an aggregate $148.6 million under the April 2007 Plan. The company has never declared or paid cash dividends on its common stocks. In the last 52 weeks, E*TRADE's stock has been in the range of $11.15 to $19.90. In the last one year, the stock lost 8 percent in value to settle at $16.55 on January 18, 2011. Based on the EPS estimates and key financials of the company, I see a one year target price of $17.
