STT State Street Corporation

On Mar 6, 2013, we reiterated our long-term recommendation on TD Ameritrade Holding Corporation (AMTD) at Neutral. This reflects the company’s declining expenses and an increase in total client assets, partially offset by reductions in average client trades per day and revenue.

Why Neutral?

TD Ameritrade’s fourth-quarter 2012 earnings came in at 27 cents per share, surpassing the Zacks Consensus Estimate of 24 cents. Better-than-expected results were primarily driven by a decline in operating expenses and higher total client assets.

Following the fourth-quarter results, the Zacks Consensus Estimate for 2013 has gone up 2.8% to $1.09 per share based on 9 out of 16 upward revisions in the past 60 days. Likewise, the Zacks Consensus Estimate for 2014 has also advanced (up 3.4% to $1.23 per share). With the Zacks Consensus Estimates for both 2013 and 2014 increasing, the company now has a Zacks Rank #2 (Buy).

The key reason behind TD Ameritrade’s stable earnings amid the ongoing sluggish economic recovery is an improvement in organic assets, much better than its peers. Further, the company is comfortably placed to continue benefiting from industry growth in RIAs and the growing demand for retail investors.

Also, TD Ameritrade’s association with TD Bank provides an opportunity for both firms to cross-sell products. The capital deployment activities by the company also boost investors’ confidence in the stock.

Yet since 2010, TD Ameritrade is facing several headwinds, including a low interest rate environment, which pressurized spread and net interest income. Further, regulatory issues, coupled with lower trading volumes, are the headwinds. Also the company’s non-diverse operations are the causes of concern.

Other Stocks Worth Considering

While we prefer TD Ameritrade, other major stocks in the same sector, worth a look include BankUnited, Inc. (BKU), Fifth Third Bancorp (FITB) and State Street Corporation (STT). While BankUnited carry a Zacks Rank #1 (Strong Buy), the other two retain a Rank #2 (Buy).

 
TD AMERITRADE (AMTD): Free Stock Analysis Report
 
BANKUNITED INC (BKU): Free Stock Analysis Report
 
FIFTH THIRD BK (FITB): Free Stock Analysis Report
 
STATE ST CORP (STT): Free Stock Analysis Report
 
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