The Zacks Analyst Blog Highlights: Charles Schwab, TD Ameritrade Holding, E*TRADE Financial, Evercore Partners and Medtronic
Zacks Equity Research
For Immediate Release
Chicago, IL – February 19, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog includeThe Charles Schwab Corporation (SCHW), TD Ameritrade Holding Corporation (AMTD), E*TRADE Financial Corporation (ETFC), Evercore Partners Inc. (EVR) and Medtronic (MDT).
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Here are highlights from Friday’s Analyst Blog:
Schwab’s January DARTs Climb
In its monthly market activity report for Jan 2013, The Charles Schwab Corporation (SCHW) reported Daily Average Revenue Trades (DARTs) of 504,700. This was up 5% from 480,200 in the prior month and 8% from 468,400 in the year-ago month.
Schwab’s net new assets bought by the new and existing clients totaled $12.1 billion, plunging 49% from Dec 2012, but surging 70% from Jan 2012. Also, this included a $2.2 billion inflow related to a mutual fund clearing services client. Further, total client assets stood at $2.01 trillion, improving 3% from Dec 2012 and 16% from Jan 2012.
Schwab opened 87,000 new brokerage accounts in the reported month, 10% less than Dec 2012 level, but it climbed 18% from Jan 2012. The company’s active brokerage accounts totaled 8.82 million, almost flat compared with the prior-month and up 3% year over year.
Moreover, clients’ banking accounts inched up 1% over the prior-month and elevated 11% year over year to 874,000. Moreover, the number of corporate retirement plan participants was 1,554 million, declining 1% from Dec 2012 but improving 3% from Jan 2012.
Peer Performances
Earlier this week, TD Ameritrade Holding Corporation (AMTD) reported 17% monthly and 3% yearly increases in average U.S. trades in its Activity Report for the month of Jan 2013. For the reported month, DARTs reached 387,000, up from 331,000 recorded in the prior month. The rise mainly resulted from the improvement in the equity markets.
Similarly, E*TRADE Financial Corporation (ETFC) also reported a rise in its DARTs for Jan 2013. The company’s DARTs stood at 153,580, improving 18% from Dec 2012 and 6% from Jan 2012, on the back of increased investments by investors.
Conclusion
Amid the challenging economy, rising DARTs and new brokerage accounts will be beneficial for Schwab. Yet, lower trading activities and fluctuating interest rates are expected to continuously impact the company’s financials in the near term.
Further, we remain concerned about the company’s low capital intensity relative to its peers. However, its focus on low-cost capital structure will help it sustain better results in the upcoming quarters.
Schwab currently retains a Zacks Rank #3 (Hold). However, one of its peers, Evercore Partners Inc. (EVR) is more favorably placed and carries a Zacks Rank #1 (Strong Buy).
Earnings Preview: Medtronic
We expect leading medical devices company – Medtronic (MDT) to beat expectations when it reports third-quarter 2013 results on Feb 19.
Why a Likely Positive Surprise?
Our proven model shows that Medtronic is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is at +2.20%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks #2 Rank (Buy): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.
The combination of Medtronic’s Zacks Rank # 2 (Buy) and ESP of +2.20% makes us very confident in looking for a positive earnings beat on Feb 19.
What is Driving the Better Than Expected Earnings?
Medtronic is enjoying market share gain on the back of the Resolute Integrity DES for the treatment of coronary artery disease. Other recently launched products are also contributing to overall growth. The company also reiterated its aim of returning 50% of free cash flow to shareholders and is targeting suitable acquisitions to augment growth. Meanwhile, Medtronic has increased its focus on the emerging markets and is targeting higher revenues from this region.
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