E*Trade reported Q4 results this morning. The stock is trading down almost 3.5% now. Highlights:
- EPS of $0.24 per share, excluding a $0.02 tax benefit, beats consensus by $0.02.
- Revenues rose 10.3% year over year to $409.5 million, beating the consensus of $396.2 million.
- Key drivers: brokerage revenues were higher than expected, brokerage expenses were slightly higher than expected, and the tax rate was lower.
- Brokerage commission revenues were 47% higher than in Q3, driven by higher average commissions of $10.89 versus $10.27 in Q3.
- Daily average revenue trades fell 3% to 136,133 from 140,126 a year ago, but were up 40% from Q3.
E*Trade brokerage added 55,329 net accounts in the quarter. That compares to 62,000 net accounts added (excluding acquired accounts) for Ameritrade and a loss of 44,400 accounts for Schwab.
Scott Patrick of Morgan Stanley says in a note to clients this morning:
We reiterate our Overweight rating on shares of E*Trade. In our view, the 10.4% decline in E*Trade shares since the beginning of 2005 creates a compelling buying opportunity. Earnings power at this company was solid in 4Q04, and we expect over 20% year-over-year EPS growth in 2005, much of which is not dependent upon equity market-driven growth. Moreover, we continue to view concerns about a price war in the online brokerage industry, which we think have been a key driver of the recent weakness in these stocks, as way overblown.One year chart below.
Full disclosure: at the time of writing, I'm short SCH, long ET.