Ameritrade Ax Yielding Green

The company sees more profitable quarters to come, excluding Datek.
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Online retail brokerage

Ameritrade

(AMTD) - Get Report

Tuesday reported a profit of 1 cent a share, falling just short of consensus estimates, but reversing a loss in the year-ago quarter, as deep cost-cutting offset a decline in trading revenues.

Early this month Ameritrade paid $1.3 billion in stock for rival Datek amid a wave of consolidation in the struggling online brokerage industry. Excluding Datek, the company said it expects to continue to be profitable in the next two quarters.

Net income for Ameritrade's second fiscal quarter ending March 29 totaled $1.9 million, or a penny a share, versus a 30-cent loss in the year-ago quarter. Revenue declined to $106.7 million from $119.0 million in the year-ago quarter, while operating margins rose to 24%, or $25.8 million, from 13% or $15.6 million in the second quarter of 2001.

Analysts were expecting a 2-cent profit and revenue of $110 million.

Ameritrade opened 76,000 new accounts in the quarter, at an average cost of $294, bringing the total up 27% to 1.88 million. Average trades per day fell to 89,129 from 113,164 from the year-ago quarter.

In a separate outlook statement on its Web site, the company forecast that trading activity and commission revenue, excluding Datek, would fall from current levels in the next two quarters, and said net revenue should total $91 million to $115 million for each quarter. Earnings per share for the third and fourth quarters, excluding Datek, should come to between 2 cents and 5 cents a share, the company said.

Ameritrade expects its trading activity rate will drop to between 4% and 5% in both the fiscal third and fourth quarters, from 4.7% and 4.8% in its first and second quarters, respectively. Ameritrade calculates trading activity rate by dividing the average number of trades per day by the average number of customer accounts for that period.

The brokerage separately reported December quarter and full year 2001 results for Datek. Including severance and relocations expenses as well as profits from the company's market-making subsidiary, which wasn't included in the merger, Datek earned $12 million on net revenue of $90.9 million in its December quarter, and $29 million on net revenue of $376 million last year.

Charges include $1.6 million and $10.1 million of severance and relocation expenses for the quarter and the year, respectively. Gains include $800,000 and $3.2 million for the quarter and the year, respectively, of equity in earnings on the subsidiary. Revenue does not include interest expense.