E*TRADE Financial's Quarter Disappoints

Maybe they should put the baby in a bigger daycare.

E*TRADE Financial (Nasdaq: ETFC  ) reported earnings for the fourth quarter, and it wasn't pretty. With analysts expecting $0.14 per share in earnings, E*TRADE reported a loss of $0.02 per share, primarily caused by fewer new accounts and trades during the fourth quarter. The loss pushed down shares of the company by as much as 10% this morning.

Granted, the small loss this year is an improvement over last year's fourth quarter, which saw losses of $0.11 per share, but this will probably be a quarter that E*TRADE will want to forget as soon as possible: $10.8 million in charges related to a settlement of class action lawsuits had a major impact on income for the quarter, and investors should hope that this is not something that continues on to future quarters.

Small economic indicators
Similar to the numbers reported by competitor TD AMERITRADE (Nasdaq: AMTD  ) , daily average revenue trades, or DARTs, were down 15% from the third quarter, and 7% from the fourth quarter of 2010. Though the fourth quarter tends to be light on trading in general, fewer trades year over year are an indicator that investors lack confidence in the market, further evidenced in that customers were net sellers in securities to the tune of $900 million.

It wasn't all bad news
Even though the numbers for the quarter were less than stellar, the year could be deemed a success. E*TRADE returned to profitability for the first time in five years. Net income for the year was $0.54 per share, compared to a loss of $0.13 per share the previous year. DARTs for the year were up to 157,000, and net new brokerage accounts were up 83% from the year prior. If it can continue to be profitable going forward, deciding to stay independent may be the best move it made last year.

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Fool contributor Robert Eberhard holds no position in any company mentioned. Follow him on Twitter, where he goes by @GuruEbby. Motley Fool newsletter services have recommended buying shares of TD AMERITRADE. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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