TD Ameritrade: 1st-quarter profit up 31%

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Posted: Tuesday, January 21, 2014 12:00 am

TD Ameritrade, employer of about 2,000 people in Omaha, said Tuesday that fiscal first-quarter profit rose 31 percent, as customer trading reached a two-year high.

The Omaha-based company said net income was $197million, or 35 cents a share, up from $147 million, or 27 cents a share, a year earlier. The per-share results beat the average estimate of Wall Street analysts of 33 cents a share. Revenue rose 16 percent to $752 million.

“Trading activity was at its highest level in more than two years,” Chief Executive Fred Tomczyk said. “The trading and investing environment has definitely improved, and we are off to a good start to fiscal 2014.”

TD Ameritrade, which collects a fee when any of its 6million customers buy or sell a stock or stock option, profited from a rising Wall Street, with the Standard & Poor’s 500 climbing about 30 percent last year. Shares of TD Ameritrade have risen about 85 percent in the past year, and climbed 4.4 percent, or $1.44, to close at $33.85 Tuesday.

The company also earns income from investing undeployed cash in customer accounts; such income rose 9 percent to $127 million. Rising interest rates help the company’s earnings from investing cash balances, and the Federal Reserve has indicated that it might further reduce monthly bond purchases that are part of the central bank’s low interest rate policy.

During the quarter, customers added $14.5 billion of new assets, a 10 percent annual growth rate. Such assets rose 24 percent from a year earlier to $596 billion.

“We have been working hard for the past five years,” Tomczyk said in an interview. “And we are now getting paid for what we have done to get here.”

Tomczyk also said TD Ameritrade has brought about 100 jobs back to the United States in recent months, jobs once sent overseas. They are mainly in operations areas such as new account opening, and have been divided between the Omaha headquarters and Fort Worth, Tomczyk said.

The company, Tomczyk also said, will spend between $10 million and $20 million in Olympic Games-related advertising. TD Ameritrade is an Olympic Games partner, sponsoring seven members of the U.S. team preparing for next month’s event in Sochi, Russia.

In addition to the ad spending, the company incurs another $20 million in costs over the four-year Olympic cycle as an official sponsor, Tomczyk said. It is worth it, he said, with no other form of exposure creating greater awareness and generating more respect.

“Brand recognition and brand consideration were up,” Tomczyk said, speaking of the company first foray into the Olympics in 2012. “That’s important to us because we are not a little Omaha company anymore. We are a big national company.”

The rise in TD Ameritrade shares should be noted by investors still looking for additional lift, but is not an indication the ride is over, said Rich Repetto, a stock analyst for New York-based Sandler O’Neil.

“No doubt valuation is an issue with the stock at these levels,” Repetto said.

He also said a slowly improving economy, growing trading by individual investors and the possibility of share-price growth from interest rate increases in the next year or two might boost shares higher.

“We still think the stock can outperform over the longer term,” Repetto said.

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