TD Ameritrade Holding Corp.'s quarterly net income soared 29 percent as the online brokerage handled a large number of trades and its asset-based revenue grew, the company said Thursday.
The Omaha-based company said it earned $204.4 million, or 34 cents per share, in its third quarter. That's up from $158.7 million, or 26 cents per share, a year ago.
Analysts surveyed by Thomson Financial expected earnings per share of 32 cents on average and revenue of $610.07 million.
Ameritrade increased its outlook for the fiscal year by 2 cents per share, to $1.34.
Ameritrade's shares gained 83 cents, or 4.5 percent, to close at $19.46.
Ameritrade handled an average of 298,000 trades per day during the quarter. That's 22 percent higher than during the same period a year ago. Ameritrade's transaction-based revenue increased to $248.9 million in the latest quarter, compared with $199.1 million in the third quarter of 2007.
The brokerage's asset-based revenue grew to $365.2 million in the third quarter, compared with $334.2 million in the same quarter last year.
Ameritrade said its total revenue increased 15 percent, to $623.6 million.
"We are proud to end yet another quarter with strong financial results, despite the challenging economic environment," Chief Executive Joe Moglia said.
Even though Moglia said he doesn't believe the U.S. economy will experience a recession, there has been plenty of pain for financial services and housing businesses.
"The bottom line is we're in a serious credit cycle, and we have been for about a year," he said.
Ameritrade has been working to generate more of its revenue from asset-based fees. That kind of revenue is less volatile than trading fees.
Credit Suisse analyst Howard Chen said in a research note that Ameritrade delivered a strong quarter based on a diversified revenue.
"Despite a challenging market backdrop, TD Ameritrade posted a solid quarter highlighted by signs of improved organic growth/asset gathering and operating expense discipline," Chen said.
Banc of America Securities analyst Michael Hecht said limiting expenses played a key role in Ameritrade's strong third quarter, but some investors may be disappointed with the company's outlook for the fourth quarter.
Hecht said in a research note that even though Ameritrade increased its full-year outlook, the company's fourth-quarter earnings prediction of 29 cents per share is lower than the 32 cents per share analysts expect.
"A beat is a beat," Hecht said, "so we see an initial positive reaction which may fade as investors realize that certain key metrics lagged competitors and new 'higher' guidance has negative implications for next quarter."
The company is also in the midst of a leadership transition. Moglia will retire Oct. 1 to become chairman after Ameritrade founder Joe Ricketts steps down.
The company's chief operating officer, Fred Tomczyk, will become CEO.
Moglia said he would begin handing over some of his duties to Tomczyk during the company's fourth quarter to help with a smooth transition.
Moglia drew applause Thursday as he concluded the last analyst conference call he plans to host.
"I will work very hard to be the best chairman for our firm that I possibly can be. It has been an absolute honor ... for me to have been our CEO," Moglia said with his voice cracking on the word honor.
Moglia said he plans to sell some of his 288,210 shares and 9 million options on Ameritrade stock to diversify his holdings and free up some cash for charitable donations. But Moglia plans to keep 80 percent of his wealth in Ameritrade.
Through the first nine months of Ameritrade's fiscal year, the company reported net income of $631.9 million, or $1.05 per share. That's up from the $445.5 million, or 73 cents per share, Ameritrade reported last year.
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TD Ameritrade Holding Corp.: http://www.amtd.com
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