Morgan Stanley analyst Scott Patrick sent a note to clients in response to Ameritrade's (ticker: AMTD) earnings Tuesday morning. Excerpts:
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F3Q05 EPS OF $0.18 IN LINE WITH EXPECTATIONS
Quick Comment: Ameritrade reported F3Q05 operating EPS of $0.18, in line with our estimate (and ahead of the First Call consensus of $0.17). There were no big surprises in the quarter’s numbers, with revenues modestly exceeding expectations while expenses were essentially in line with our forecast. See below for details.
Key points worth noting: Management narrowed guidance for F2005 to $0.75-0.80 from $0.73-0.83 previously, which compares with our current estimate of $0.78. Separately, net new account openings were a bit sluggish (24,000) in F3Q05, but we view this as a function of a difficult environment, not any deterioration in the company’s compelling value proposition.
Implications: We maintain our Equal-weight rating. Though the retail brokerage environment remains challenging, Ameritrade delivered a record June quarter, demonstrating increased normalized earnings power at this company. And while we see significant strategic and financial benefits related to Ameritrade’s pending acquisition of TD Waterhouse, these benefits are now largely discounted in the stock, in our view.
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