Ameritrade Powers Ahead
Retail investors continue to be kind to
Ameritrade
(AMTD) - Get Report
.
Thanks to record-high trading activity in January, the Omaha, Neb., company raised the lower end of its earnings guidance for the fiscal second quarter and full year, sending shares up 5% to $16.46.
Ameritrade now expects to report earnings of between 13 cents and 19 cents a share in the second quarter, up from previous guidance of 9 cents to 19 cents a share. For the full year, the firm expects to earn between 53 cents and 79 cents a share, up from previous guidance of 49 cents to 79 cents a share. On average, analysts are calling for 18 cents in the second quarter and 75 cents for the full year.
Ameritrade said it set a new record for trading activity, reporting average daily volume of 254,000 trades in January. On Jan. 20, Ameritrade posted a record 326,000 trades. The company also opened 37,000 net new accounts in January, bringing its total to 3.2 million.
A revival in the stock market over the past year has encouraged more retail investors to start trading again, helping Ameritrade and its rivals post much better results. Still, some analysts expect trading activity to fall off somewhat going forward.
"January activity levels are ahead of our calendar first quarter estimate by 12%, but we expect volumes to come down to a more sustainable level in the near term," said Merrill Lynch analyst Colin Clark.
Clark is looking for the company to process 226,000 average daily trades this quarter. If January trading levels persist, however, he said Ameritrade could beat his first quarter estimate of 18 cents by 1 cent or 2 cents a share.
Credit Suisse First Boston analyst Douglas Harter predicts that the firm will execute 214,000 trades a day in the second quarter but reiterated his outperform rating on the stock Friday.
Meanwhile, Friedman Billings Ramsey analyst Matt Snowling increased his fiscal 2004 earnings estimates on Ameritrade to 74 cents a share from 69 cents. He also raised his 2005 estimates to 88 cents from 80 cents. "Ameritrade continues to be one of the most leveraged plays on the return of the retail investor," he said.
On Friday, Ameritrade began reporting average and month-end balances for client margin loans. For January, the average client margin loan balances were $3 billion while client margin loan balances totaled $3.4 billion. Every additional $1 billion in margin balances translates into an additional 7 cents to 8 cents in annual earnings, according to Snowling.
Competitors
E*Trade
(ET) - Get Report
and
Charles Schwab
(SCH)
rose 3.7% and 2.3%, respectively, buoyed by Ameritrade's rosy outlook.